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



          HEARING TO REVIEW THE STATE OF AGRICULTURE IN KANSAS

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
              GENERAL FARM COMMODITIES AND RISK MANAGEMENT

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                        JUNE 5, 2007, SALINA, KS

                               __________

                           Serial No. 110-24


          Printed for the use of the Committee on Agriculture
                         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
                 April Slayton, Communications Director
           William E. O'Conner, Jr., Minority Staff Director
                                 ______

      Subcommittee on General Farm Commodities and Risk Management

                BOB ETHERIDGE, North Carolina, Chairman

DAVID SCOTT, Georgia                 JERRY MORAN, Kansas, Ranking 
JIM MARSHALL, Georgia                Minority Member
JOHN T. SALAZAR, Colorado            TIMOTHY V. JOHNSON, Illinois
NANCY E. BOYDA, Kansas               SAM GRAVES, Missouri
STEPHANIE HERSETH SANDLIN, South     CHARLES W. BOUSTANY, Jr., 
Dakota                               Louisiana
BRAD ELLSWORTH, Indiana              K. MICHAEL CONAWAY, Texas
ZACHARY T. SPACE, Ohio               FRANK D. LUCAS, Oklahoma
TIMOTHY J. WALZ, Minnesota           RANDY NEUGEBAUER, Texas
EARL POMEROY, North Dakota           KEVIN McCARTHY, California

               Clark Ogilvie, Subcommittee Staff Director

                                  (ii)










                             C O N T E N T S

                              ----------                              
                                                                   Page
Boyda, Hon. Nancy E., a Representative in Congress from Kansas, 
  opening statement..............................................     5
Etheridge, Hon. Bob, a Representative in Congress from North 
  Carolina, opening statement....................................     1
King, Hon. Steve, a Representative in Congress From Iowa, opening 
  statement......................................................     6
Moran, Hon. Jerry, a Representative in Congress from Kansas, 
  opening statement..............................................     2
    Prepared statement...........................................     4
Smith, Hon. Adrian, a Representative in Congress from Nebraska, 
  opening statement..............................................     7

                               Witnesses

Dumler, Troy J., Agricultural Economist, Kansas State University, 
  Garden City, KS................................................     8
    Prepared statement...........................................     9
    Submitted report.............................................    16
Miller, Ph.D., Bill, Cattle Producer, Princeton, KS; on behalf of 
  Franklin County Farm Bureau Association........................    29
    Prepared statement...........................................    30
Rome, Steve, Farmer; President, Southwest Kansas Corn Growers 
  Association; Board Member, Kansas Corn Growers Association, 
  Hugoton, KS....................................................    31
    Prepared statement...........................................    32
Starck, Brian, Corn, Soybean, and Wheat Farmer; Swine Producer, 
  Fairbury, NS; on behalf of Jefferson County, Nebraska Farm 
  Bureau.........................................................    34
    Prepared statement...........................................    36
Pracht, John C., Corn, Wheat, and Soybean Farmer/Rancher, 
  Westphalia, KS.................................................    46
    Prepared statement...........................................    48
Childs, Barry K., Grain Farmer; Vice President and Fieldman, Farm 
  Management Services, Inc.; Childs Farms Ptr., Belleville, KS...    49
    Prepared statement...........................................    52
Parker, Gary, Soybean, Wheat, and Milo Farmer, Moran, KS.........    55
    Prepared statement...........................................    57
Meisinger, Mark, Wheat Farmer and Cow/Calf Producer, Marion, KS..    60
    Prepared statement...........................................    61
Robbins, Lee, Director, Kansas Cattlemen's Association; Cow/Calf 
  Producer, Yates Center, KS.....................................    61
    Prepared statement...........................................    62
Polansky, Hon. Adrian J., Secretary of Agriculture, State of 
  Kansas, Topeka, KS.............................................    70
    Prepared statement...........................................    72

                          Submitted Statements

Clanton, Steven, Commissioner, Kansas Wheat and Soybean 
  Commissions; on behalf of Kansas Association of Wheat Growers; 
  Kansas Wheat Commission, Minneapolis, KS, prepared statement...    88
Dahlsten, Edie, Vice President, Kansas Farm Bureau, Manhattan, 
  KS, prepared statement.........................................    84
Hanson, William V. ``Bill'', Chairman, Crop Insurance 
  Professionals Association, Washington, D.C., prepared statement    77
Hineman, Don J., Farmer and Cow/Calf Producer, Dighton, KS, 
  prepared statement.............................................    87
Kaufman, Leslie, Executive Director, Kansas Cooperative Council, 
  Topeka, KS, prepared statement.................................    95
Kejr, Joe, President, Kansas Association of Wheat Growers, 
  Brookville, KS, prepared statement.............................    78
Kocher, Kurt, Cloud County Producer, Glasco, KS, prepared 
  statement......................................................    84
Larson, Daryl A., Farmer and Rancher, McPherson, KS, prepared 
  statement......................................................    87
Letter to Hon. Collin C. Peterson from concerned Kansas 
  agriculture groups.............................................    97
Melander, Gary, Assaria, KS, prepared statement..................    87
Penner, Paul, Vice President, Kansas Association of Wheat 
  Growers, Hillsboro, KS, prepared statement.....................    80
Tomlinson, Ralph and Barbara, Baldwin City, KS, submitted article    99
Tunnell, Tom R., President, Kansas Grain and Feed Association, 
  Kansas Agribusiness Retailers Association, Topeka, KS, prepared 
  statement......................................................    93
Winter, Ken, President of the Board, Kansas Cattlemen's 
  Association, Junction City, KS, prepared statement.............    80
Zongker, Derek and Michelle, Farmers, Sylvia, KS, prepared 
  statement......................................................   101

 
          HEARING TO REVIEW THE STATE OF AGRICULTURE IN KANSAS

                              ----------                              


                         TUESDAY, JUNE 5, 2007

                  House of Representatives,
 Subcommittee on General Farm Commodities and Risk 
                                        Management,
                                  Committee on Agriculture,
                                                         Salina, KS
    The Subcommittee met, pursuant to call, at 9 a.m., at the 
College Center at Kansas State University at Salina, 2310 
Centennial Road, Salina, Kansas, Honorable Bob Etheridge 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Etheridge, Moran, Boyda, King, and 
Smith.

 OPENING STATEMENT OF HON. BOB ETHERIDGE, A REPRESENTATIVE IN 
                  CONGRESS FROM NORTH CAROLINA

    Mr. Etheridge. Good morning. This field hearing of the 
Subcommittee of the General Farm Commodities and Risk 
Management to review the state of agriculture in Kansas will 
come to order. As Jerry reminds me, this is his Subcommittee; 
he's just loaned it to me this year.
    Mr. Moran. Some of us do hope it's temporary.
    Mr. Etheridge. Keep dreaming, Jerry. We really are honored 
to be here and thank you. And we're going to move into the 
program and I do, before I have opening remarks, want to thank 
Jerry and his staff and Nancy and hers for the hospitality. 
Last night we had dinner at just a fabulous restaurant. It was 
an old school building. Amazing what you can do with an old 
school building. I'm going to go back home to my folks in North 
Carolina and tell them we need a nice restaurant because it 
really was a good place. And it's good to be here.
    It's my pleasure to be here today in America's Heartland in 
the great State of Kansas. It's a distinct privilege to be in 
the district of my good friend, the Ranking Member of the 
Subcommittee, Jerry Moran. Last year, no matter what happened 
in the election, we were going to have a hearing in Kansas 
because we traveled all over the country and said we were going 
to talk about it later. During the previous Congress I 
participated in many of the field hearings held on this 
Subcommittee under Jerry's leadership and others as we traveled 
the country. While I was unable to attend them all, I think 
Jerry made about every one of them.
    And Nancy is new to the Committee and she was very 
instrumental in helping make sure we got this back to Kansas 
between her and Jerry. So I thank both of them.
    During the hearings last year I met with producers in 
Arizona, from Arizona to the Rust Belt in Indiana, from the 
upper Midwest States of Minnesota, South Dakota to the peanut 
and cotton fields of Georgia and even in North Carolina. So I 
welcome the opportunity to be here meeting with producers in 
Kansas.
    Next week this Subcommittee intends to begin the hard work 
of putting together the bulk of one of the most important 
pieces of this or any farm bill and that's Title I, the 
commodity title. Already, two other subcommittees have put 
forth and amended their respective pieces of the farm bill 
ranging from energy to conservation to dairy to research. Our 
turn is coming to consider the part of the farm bill that is 
the heart and soul of the safety net the farmers depend on when 
times really are tough. We've had some 70 years out here where 
you've had drought. So while the topic of today's hearing is to 
review the state of agriculture here in Kansas and neighboring 
states, the witnesses who will testify today have a unique 
chance to get the last word in before we begin the heavy 
lifting on the commodity title.
    Now I highly recommend that you all take advantage of that 
and I'm sure you will. I want to thank all the witnesses who 
are here today who will participate. I appreciate your 
commitment to agriculture because folks need to remember that 
without the people who till the soil, there wouldn't be a whole 
lot in the dairy case or the fresh fruit and vegetable case in 
the grocery store.
    I am now pleased to recognize one of the co-hosts of our 
visit to Kansas and my good friend and a partner in our work on 
behalf of agriculture, the Subcommittee's Ranking Member, Jerry 
Moran, for his opening statement.

  OPENING STATEMENT OF HON. JERRY MORAN, A REPRESENTATIVE IN 
                      CONGRESS FROM KANSAS

    Mr. Moran. Mr. Etheridge, thank you very much. Thank you 
for joining us. My particular appreciation to Mr. King. Mr. 
King is a Member of Congress from Iowa and Mr. Smith is a new 
Member of Congress from Nebraska. We appreciate them both, very 
much, taking time out of their schedules to come to Kansas and 
hear from Kansas and Nebraska producers. And to Ms. Boyda, it's 
been a real privilege to have another Kansan serve on the House 
Agriculture Committee. And we are working hard to develop a 
good, close, working relationship to see that good things 
happen for Kansas farmers and ranchers at a time in which 
Congress is truly focused on agriculture. So I appreciate very 
much the help that Mrs. Boyda provided us in having this 
hearing here today and glad that my colleagues would take the 
time to join us.
    And Mr. Etheridge, as he said, we are friends. We will have 
banter back and forth from time to time, but ultimately both of 
us are interested in seeing that this Subcommittee and really 
the full Committee on Agriculture moves forward in a bipartisan 
way designed to develop farm policy that is advantageous to the 
producers of this country.
    We have had--I've lost a bit of credibility by the arrival 
of these other Members because for most of the time I've been 
in Congress I've been advocating for drought assistance.
    Mr. Etheridge. We won't hear that again.
    Mr. Moran. They flew over the state arriving here yesterday 
and the ponds were full and the fields are green. We're now 
advocating for flood assistance.
    It is a sad thing in our state, all but 12 counties in the 
First Congressional District of Kansas, in fact 85 percent of 
the counties in Kansas have, in 2007, been declared disaster 
areas. So we have had significant challenges and just seen that 
the challenges have changed.
    We started with 5 and 6 years of drought in much of our 
state, followed by a December 31st winter storm which consisted 
of: 5 inches of rain; followed by 6 inches of ice; followed by 
2 feet of snow and 40 mile an hour winds resulting in 44 Kansas 
counties being declared natural disaster counties. Then it was 
just a few weeks ago in April we toured wheat losses here in 
Saline County and four other counties. We had 3 nights of 
temperatures in the teens, which, from my perspective, it 
appeared that 2007 was going to be the year in which we might 
have some recovery on Kansas farms. And our winter wheat crop 
was significantly damaged, particularly in this part of the 
state, and now we've had tornadoes, floods and hail. I'm now 
predicting locusts are next. Every array of disaster has beset 
our state.
    So our efforts on behalf of disaster assistance perhaps are 
not over, but my number one priority for 2007 in agriculture 
was passage of a disaster assistance plan which Congress did a 
week ago and the President has signed that bill. It's a modest 
amount of assistance for farmers and I am pleased that we were 
successful in doing that. As I say, it's my number one priority 
of 2007, despite the fact that I know this is the year in which 
we're going to develop the farm bill and the process has begun.
    Mr. Etheridge is right. Our full Committee held 11 field 
hearings across the country. We were in California, New York 
State, Washington and Alabama and places in between, and the 
Subcommittee that Mr. Etheridge and I led last year held four 
more hearings. This will be our fifth and this is the final 
one, before the farm bill is written, out in the country. So 
I'm very pleased that we've been successful in having Members 
of this Subcommittee come here in advance of writing the farm 
bill for 2007. It is perhaps our last shot.
    Mrs. Boyda and I were involved in the selection of 
witnesses and much of our criteria was related to finding 
farmers who are earning a living in farming. We did not seek 
necessarily people who represented particular farm 
organizations or commodity groups. And I looked, in particular, 
for witnesses that would unlikely--it would be unlikely that 
they would have the opportunity to testify in our Nation's 
Capital.
    So who we will hear from today are people who are actively 
engaged in farming and ranching in Kansas who are trying to 
help figure out how their lives can succeed and how there can 
be another generation of young Kansans on family farms in our 
state.
    This Subcommittee will meet soon to mark up the farm bill. 
Those of you who listened in on the Conservation Subcommittee, 
Mr. Etheridge and I have, and we do not want to defer 
everything to the full Committee and we hope to take the 
amendments as they're offered in our Subcommittee.
    Let me just close by saying that the Gypsum community, 
which is just south of Salina, lost a long time farm leader, 
Steve Roe, just on June 2nd. And we treat our--we hold our 
Kansas farm families in high regard here and I just want to 
express my condolences to his family and express my 
appreciation for he, who, like many others, tried to figure out 
how to make a living farming, but provide leadership in their 
communities and the farm organizations throughout their lives.
    So, Mr. Chairman, thank you very much for allowing us the 
opportunity to join you and for you to have the opportunity to 
be here among the Kansans gathered here today.
    [The prepared statement of Mr. Moran follows:]

 Prepared Statement of Hon. Jerry Moran, a Representative in Congress 
                              From Kansas
    Mr. Chairman, thank you for holding this hearing in my home State 
of Kansas. It is a pleasure for me to welcome you and the other Members 
of the Committee to Salina, Kansas. The Kansans I represent are 
grateful for the opportunity to have their voices heard during this 
critical time for the future of agriculture policy in the United 
States. In Kansas, not every Kansan is a farmer, but every Kansan is 
affected by agriculture.
    I would also like to acknowledge my colleague and fellow Kansan, 
Congresswoman Nancy Boyda. Thank you, Congresswoman, for traveling to 
the First District to participate in this hearing. Finally, thank you 
to Kansas State University at Salina for hosting today's event.
    Today we will hear from seven Kansas producers, a Nebraska 
producer, and an agriculture extension economist from Kansas State 
University. Each witness was chosen because they are a leader in their 
respective community and have demonstrated the ability to conduct a 
successful farming or ranching operation. The witnesses were not chosen 
because they have an affiliation with a particular organization or 
cause, but because they represent their peers involved in production 
agriculture across the state and region.
    As the Committee undertakes drafting the next farm bill, it is 
important that we hear from those most heavily involved in production 
agriculture. In the end, it is these producers the farm bill will 
affect. In creating farm policy that will influence the direction of 
agriculture for the next 5 years, the Committee must know what works 
and what does not work on the ground level. It is one thing to sit in 
Washington, D.C. and listen to policy analysts, but it is quite another 
to hear directly from someone whose livelihood is directly affected by 
Congress' actions.
    I hope that today's witnesses will help the Committee better 
understand agriculture production on the High Plains. I look forward to 
hearing the witnesses discuss their farm operations and how their 
operations have been affected by the Commodity Title of the 2002 Farm 
Bill. I also hope that each producer will give the Committee 
recommendations about how Congress can improve, or perhaps not 
detrimentally change, existing farm policy as the Committee drafts the 
2007 Farm Bill.
    As I have traveled across Kansas, I have heard many positive 
comments about the 2002 Farm Bill. I suspect that many of the witnesses 
today would agree that the basic structure of the 2002 Farm Bill should 
remain in place. However, this is not to say there are not certain 
aspects of the legislation that can be improved upon. If there are ways 
to improve on the structure of the 2002 Farm Bill, the Committee should 
listen to the advice of today's witnesses and attempt to implement 
those suggestions that make sense.
    I believe most producers across Kansas and the United States would 
just as soon earn their living from the marketplace. Nevertheless, 
there are times when the marketplace may not be enough and Congress 
should craft policy that will deliver necessary assistance. This should 
be done in a reliable and consistent fashion that utilizes the least 
market distorting means possible. I believe today's witnesses will help 
to identify how to meet the future needs of agriculture in the United 
States.
    I would like to take the opportunity to mention that Congress 
recently passed, and the President signed into law, disaster assistance 
for agricultural producers. This is something that many Kansas farmers 
and ranchers have expressed the need for and I have supported for the 
past few years. I am glad this assistance will now be available to 
producers and I will work along with my colleagues on the Committee to 
ensure that USDA delivers the aid in the most expeditious and efficient 
manner possible. Problems, such as declining yields in Kansas, are one 
of the reasons this legislation was needed. As we move forward with the 
2007 Farm Bill, I hope the Committee can find a solution to problems 
like declining yields that necessitate ad hoc disaster assistance.
    Finally, as I conclude my opening statement, I would like to take 
this opportunity to extend my condolences to the Steve Roe family of 
Gypsum, Kansas. Steve recently passed away on Saturday, June 2, 2007. 
Although I did not know Steve personally, I have heard tremendous 
things about him from people who did. By all accounts Steve was a very 
good farmer and stockman. He was forward thinking and able to utilize 
new technologies in his farming practice. In light of his many efforts 
and achievements, his family came first. Steve and his wife Joyce 
raised two children, Jennifer and Kristi. Our thoughts and prayers go 
out to Steve's family in this time of difficulty. Steve will be a 
greatly missed member of the Kansas agriculture community.
    Again, thank you, Mr. Chairman, for holding this hearing and I look 
forward to the testimony of today's witnesses.

    Mr. Etheridge. Jerry, thank you. And I want to give my 
other colleagues here an opportunity to have opening 
statements. I think that's important to have brief comments. 
And it's my distinct pleasure now to recognize the other co-
host of this endeavor. Although she is new to Congress, as to 
agriculture issues, she's already distinguished herself as a 
voice on behalf of farm families. She serves on two other 
agriculture subcommittees besides this one. So she has an ample 
opportunity to really engage in what happens in agriculture, 
specifically here in Kansas' agriculture. The first 5 months 
since she first took office Nancy Boyda is already making a 
difference. Nancy has quickly established herself as a leader 
in Congress, has earned a reputation as a tireless advocate for 
Kansas working families. I'm now pleased to recognize the 
Second District Congresswoman of Kansas, Congresswoman Nancy 
Boyda.

 OPENING STATEMENT OF HON. NANCY E. BOYDA, A REPRESENTATIVE IN 
                      CONGRESS FROM KANSAS

    Mrs. Boyda. Thank you, Chairman. I really appreciate it. 
And I will make my remarks brief. We have 2 hours and I want to 
make sure that we hear from our producers and our witnesses.
    So thank you very much, Mr. Chairman, for coming and for 
our other Members from Nebraska and from Iowa. I really 
appreciate your coming here. The people of Kansas deeply 
appreciate having their voice heard. And I will say that timing 
is everything and I got to Congress in a very good time. 
Whether it's the Ag Committee or Energy, even Health Care, real 
live conversations, even civil bipartisan conversations, maybe 
more than you think, are happening about how we find real 
solutions. So I get to go on the Agriculture Committee who--
it's one of the most bipartisan committees, if not the most, 
bipartisan Committee in Congress and have the honor to serve 
with Jerry Moran. And it has been very, very good. Jerry's 
helped me certainly understand--I stopped saying the whole 
thing about I'm trying to understand completely the farm bill. 
``Don't say that. Nobody will believe you.'' But he's certainly 
been helpful in helping me understand some of the more complex 
issues.
    One of the things that we've done is had some field, just 
roundtable discussions around the district. And clearly 
everyone is looking for some help with the safety net with 
disaster relief. How can we level out those ups and downs for 
our families so disaster relief, which is so appreciated and so 
needed, we don't all have to sit on the edge of our chairs or 
worse waiting to see what's going on happen.
    And, clearly, as we've talked about even this morning, each 
group sees the answers a little bit different. So having a 
chance to come here today, having a chance to go right from 
here back to D.C., on a plane and talk with these guys, and 
specifically with Jerry, about how do we translate that into 
the best farm bill for our country, but specifically the best 
farm bill for Kansas.
    So they say timing is everything. I will congratulate you. 
Democracy is not a spectator sport. It is very much a contact 
sport. And I feel like I've gotten to know so many of you one 
on one because you have been there from the day--probably 
before I was sworn in--saying, ``Let me tell you about what's 
going on in Kansas.''
    There's one thing: We're the producers. We produce what 
America eats and what I feed my family and the rest of you feed 
yours. And we want to make sure that the producer has a strong 
voice in Congress. Not the only voice, but, by God, we need to 
make sure that you have that voice and you know that it's been 
heard.
    So we've been trying to get this hearing together for quite 
a little while and it's come together. But, as I say, timing is 
everything. We're going to be marking this up with amendments 
in the next few weeks, maybe in the next couple of weeks.
    So your voice will be the last field hearing that's heard 
before the ink is put on that paper about what this farm bill's 
going to look like. So thank you all for coming. It's a 
tremendous response this morning. And I look forward to hearing 
what you have to say. Thank you for being here.
    Mr. Etheridge. Thank you, Nancy. We have two other 
colleagues with us today. Even though they're not on our 
Subcommittee, they're on the full Committee. It's great to have 
them come and join us. We were talking last night, we wondered 
whether or not we'd have many people show up this morning. And 
after looking around at how wet it was yesterday, I figured 
farmers would not be in the field. They may be getting 
equipment ready, but they wouldn't be in the field. Jerry said, 
``Nah, they'll be there. It'll be too wet to plow and not dry 
enough to get everything ready.'' So thank you for coming.
    Now let me turn to my colleagues for whatever opening 
statements they want to have. From the Fifth Congressional 
District of Iowa Congressman Steve King will be recognized for 
whatever opening comments you want to make.

   OPENING STATEMENT OF HON. STEVE KING, A REPRESENTATIVE IN 
                       CONGRESS FROM IOWA

    Mr. King. Thank you, Mr. Chairman. I appreciate you holding 
this field hearing. I appreciate being here with my good 
friend, Jerry Moran, and my other colleagues that are here.
    We get a lot out of these field hearings. And when we have 
them in Washington our time is pulled. We're like a wishbone 
for our time. But when we can come to the field then we can 
really focus on the witnesses and focus on listening and that's 
what I came here to do.
    I do want to tell you that my Ag legislative assistant is 
Brent Boydson, a K-State grad, and he played football here. So 
he keeps me on top of what's going on in Kansas and he really 
regrets that he is not able to be here today to show me the 
purple that's around this town. So we have a great working 
relationship.
    I represent the western third of the State of Iowa and my 
background started out in soil conservation work. I bought a 
bulldozer in 1975 and began to build terraces, dams, waterways, 
clean out cattle yards and whatever else needed to be done. So 
from 1975 on up till I entered Congress and sold that business 
to my oldest son, my life has been the earth moving business. I 
see that as kind of the canary in the cage of agriculture 
economy. The dirt's always been there, it can wait another year 
to be moved, and so when the economy goes up, they will see me 
last and when the economy starts to go down, they'll strike me 
off their list first. And that's the sense that I have.
    So I've been acclimated to, I'll say, being sensitized 
towards the fluctuations in our ag economy. It's great to see 
where it is overall in the country today. And I've seen all of 
these things that Jerry talked about and lived through them all 
with the exception of the pestilence. I haven't had that come 
through.
    So I wanted to make those comments and then I just wanted 
to ask this question to the real Kansans: After you've been 
through all of that--the famine, the drought, the blizzards, 
the ice storms and the tornadoes and all that, are there any 
pansies that survive? I expect not. I think it's all real hard 
working people here that put their roots down into the soil. 
And that's the part that I care an awful lot about and it is 
the essence of America and that's what gets me out here to 
Kansas to see that today. Thank you.
    Mr. Etheridge. Thank you. And, finally, another new Member 
of Congress and a new Member to the Committee, we're glad to 
have him join us today, Adrian Smith, from the Third 
Congressional District in Nebraska.

  OPENING STATEMENT OF HON. ADRIAN SMITH, A REPRESENTATIVE IN 
                     CONGRESS FROM NEBRASKA

    Mr. Smith. Thank you, Mr. Chairman. It's great to be here, 
despite the purple--the tie, the tape on the floor, I mean, 
that's pretty rotten.
    I am grateful to be here and it's an incredible experience 
as a new Member of Congress in the district immediately north 
of here. I'm glad that things are wet enough down here that we 
don't have to worry about any Republican River water flow 
anymore. Maybe I struck a cord.
    Seriously, as we look at the issues important to our 
economies, I look at this Congressional district as being so 
very similar to my own where there's flooding in one end of the 
district and still drought in the other. The challenges we face 
are immense and oftentimes we focus so many of our policies 
perhaps on protecting the family farm which, I think, is 
commendable. That is an objective I share. I would rather 
characterize it as strengthening the family farm to afford the 
tools necessary to farmers and those on the front lines to 
compete.
    And so many times policies stand in the way. Public policy 
stands in the way of innovation, of individuals pursuing new 
ways of doing things.
    And so I want to thank Brian Starck from my district, 
Fairbury, Nebraska, for coming down here today and for all of 
you for showing up here today because it's vital that you give 
us your expertise, your insights on the issues because we've 
got big decisions to make and we certainly need your input. So 
go Big Red. Thank you.
    Mr. Etheridge. Thank you. We'd like to welcome our first 
panel to the table. Our four panelists are Mr. Tony Dumler; 
he's an Agricultural Economist from K-State in Garden City, 
Kansas. Dr. Bill Miller, cattle producer from Princeton, 
Kansas. Mr. Steve Rome.
    Mr. Rome. Rome.
    Mr. Etheridge. Rome. He's a farmer, a crop farmer in 
Hugoton, Kansas.
    Mr. Rome. Hugoton.
    Mr. Etheridge. Hugoton. And Mr. Brian Starck, who we've 
just been introduced from Nebraska. Appreciate you coming down.
    Gentlemen, please know that your full statements will be 
entered into the record and if you would try to keep your 
comments as close to 5 minutes as possible to allow more time 
for questions from the panel if they'd like.

  STATEMENT OF TROY J. DUMLER, AGRICULTURAL ECONOMIST, KANSAS 
               STATE UNIVERSITY, GARDEN CITY, KS

    Mr. Dumler. Mr. Chairman, Members of the Subcommittee, 
thank you for inviting me to testify. I appear before the 
Subcommittee to discuss the challenges and opportunities facing 
agriculture producers in Kansas.
    Having spent nearly a decade assisting farmers and ranchers 
in managing their businesses and having grown up on the farm 
myself, I understand the challenges of Kansas producers are 
numerous and varied. The last 5 years have clearly demonstrated 
some of those challenges.
    According to data from the Kansas Farm Management 
Association, over this period of time average net farm income 
has ranged from $19,000 per farm in 2002 to more than $62,000 
per farm in 2004. Much of this variability can be explained by 
weather and fluctuating production costs.
    The crop and livestock producers have also experienced 
increased demand for their products which has led to higher 
market prices.
    I think the relevant question for Kansas producers is this: 
What is the most likely source of income variability over the 
next 5 years? At this point continued demand for renewable 
fuels indicates that prices for grains and oil seeds will 
likely remain strong; however, those same prices will also put 
pressure on livestock producers. As the last couple months have 
demonstrated, weather continues to be an important production 
factor for Kansas farmers and ranchers.
    There's little question that commodity subsidies have 
reduced the income variability of Kansas farms. From 2002 to 
2006 government payments averaged 60 percent of net farm income 
for Kansas Farm Management Association farms.
    As part of a recent nationwide survey on preferences for 
the 2007 Farm Bill, Kansas producers indicated that they 
generally support the current three-part safety net. That same 
survey indicated that among existing program funding 
priorities, Kansas producers ranked disaster assistance over 
each of the three current commodity programs. These results 
suggest that the current safety net may have some holes.
    Primary support for Kansas producers has come in the form 
of direct payments. Being decoupled from price and production, 
the primary advantage of direct payment is that it has minimal 
distortions in global markets. For Kansas producers, the 
primary advantage of direct payments is they have been, at 
times, the only means of support in the low yield/high price 
environments that predominated since the passage of the 2002 
Farm Bill. Direct payments are not without disadvantages, 
including the fact that payments get capitalized into land 
values. But the assertion that direct payments get capitalized 
into land values and payments from other commodity programs do 
not has no economic validity.
    Proposals have been made to convert the current price-based 
counter-cyclical program to a revenue-based program. When asked 
to prioritize new program funding, Kansas producers 
participating in the 2007 Farm Bill preference survey ranked a 
counter-cyclical revenue program behind only funding for bio-
energy production incentives.
    An analysis of the USDA revenue proposal, for example, 
indicates over the last 5 years Kansas farmers would have 
received $230,000,000 more under a revenue-based counter-
cyclical program versus the current price-based program. Most 
of that support would have come in 2002, a low income year for 
Kansas farmers.
    Because the revenue-based counter-cyclical program can 
provide support at times when yields are low and prices are 
high, it offers the potential to reduce ad hoc disaster 
assistance.
    Finally, Kansas farmers currently have a tremendous 
opportunity to earn an income from the market. If government 
support is deemed to be appropriate, it also seems appropriate 
that those policies encourage a continuation of that market 
return. Thank you very much.
    [The prepared statement of Mr. Dumler follows:]

 Prepared Statement of Troy J. Dumler, Agricultural Economist, Kansas 
                   State University, Garden City, KS
Introduction
    The challenges of Kansas producers are numerous and varied. The 
last 5 years have seen sustained droughts, brutal winter storms, late 
spring freezes, widespread flooding, and massive tornados. These events 
by themselves make agricultural production in Kansas interesting. But 
those factors are not the only ones to make the last 5 years 
interesting. Rising energy costs and increasing demand for crop and 
livestock commodities have also had a significant impact on 
agricultural production in Kansas. Currently, a variety of forces are 
aligning to shape the future of agriculture in Kansas and the United 
States. The immediate future looks brighter for some, but perhaps 
dimmer for others. Following is a discussion of the challenges facing 
Kansas producers.
Farm Income
    Data from the Kansas Farm Management Association (KFMA) indicates 
that net farm income in Kansas has mirrored U.S. net farm income (Table 
1). After experiencing lows in 2002, net farm income, both nationwide 
and in Kansas, recovered to record levels in 2004 before dropping each 
of the last 2 years. Though Kansas farm income was barely a record in 
2004, nevertheless it was three times higher than it was in 2002--the 
only year in the last 5 in which net farm income did not cover family 
living expenses.

       Table 1. Net Farm Income in the U.S. and Kansas (2002-2006)
------------------------------------------------------------------------
          Year                U.S. (Total $)         Kansas * ($/Farm)
------------------------------------------------------------------------
             2002                      40.2                  19,106
             2003                      60.4                  51,051
             2004                      85.4                  62,604
             2005                      73.8                  56,982
             2006                      60.6                  46,593
------------------------------------------------------------------------
* Kansas Farm Management Association farms.


    Much of this variability in income can be explained by weather and 
fluctuating production costs. Figure 1 shows the annual average yields 
for wheat, corn, grain sorghum, and soybeans in Kansas. Widespread 
drought in 2002 resulted in low yields for all four crops. Wheat yields 
rebounded to near record highs in 2003, but dry conditions that summer 
produced low yields once again for the fall crops. While wheat yields 
were again below average in 2004, yields of fall crops were above 
average. Yields for all four crops were average or above in 2005, 
before dropping in 2006.

[GRAPHIC(s) NOT AVAILABLE IN TIFF FORMAT]


    The variability of crop production was exacerbated by rising input 
costs during this period of time, putting additional pressure on 
income. As seen in Figure 2, diesel fuel and natural gas prices 
increased by 145 and 97 percent, respectively, from 2002 to 2006. 
Current forecasts from the Energy Information Administration (EIA) 
point to slightly higher costs in 2007. The increasing energy costs 
have caused crop production costs to increase as well. Table 2 shows 
the energy intensive expenses for non-irrigated KFMA crop farms from 
2002-2006. Each year from 2003 to 2005 had double-digit percentage 
increases for fertilizer and fuel expenses. Fuel costs continued the 
double-digit increase in 2006, while fertilizer expenses increased by a 
modest 1.55%.


[GRAPHIC(s) NOT AVAILABLE IN TIFF FORMAT]




                Table 2. Energy Intensive Expenses for Non-Irrigated KFMA Crop Farms (2002-2006)
----------------------------------------------------------------------------------------------------------------
                Expense Category                     2002         2003         2004         2005         2006
----------------------------------------------------------------------------------------------------------------
Fertilizer and Lime
  Crop Expense                                       $21,114      $24,710      $27,858      $36,797      $37,920
  Expense/Crop Acre                                   $16.55       $19.18       $21.13       $26.69       $27.11
  Annual Change (%)                                                15.83%       10.20%       26.31%        1.55%
Gas, Fuel, and Oil
  Crop Expense                                       $11,584      $13,257      $15,806      $20,901      $24,127
  Expense/Crop Acre                                    $9.08       $10.29       $11.99       $15.16       $17.25
  Annual Change (%)                                                13.27%       16.55%       26.45%       13.75%
Total Energy Expense
  Crop Expense                                       $32,698      $37,967      $43,664      $57,698      $62,047
  Expense/Crop Acre                                   $25.64       $29.46       $33.12       $41.85       $45.01
  Annual Change (%)                                                14.92%       12.42%       26.36%        7.54%
----------------------------------------------------------------------------------------------------------------
Source: Kansas Farm Management Association 2006 Databank.

    The past 5 years have not been all negative though. Even after 
declining somewhat in 2006, beef cattle prices have remained strong. In 
addition, crop prices have increased significantly due to rising demand 
for ethanol. At this point, continued demand for renewable fuels 
indicates that prices for grains and oilseeds will likely remain 
strong. However, those same strong prices will also put pressure on 
livestock producers. Evidence of this occurring may already be evident 
in the 2006 KFMA data. While income on crop farms in 2006 was generally 
equal to or greater than income in 2005, beef cattle operations saw 
declines in income (Table 3). This drop in income can partially be 
explained by lower cattle prices in 2006 and higher forage costs caused 
by drought. But it is also likely that the increase in feed grain 
prices in the fall of 2006 had a negative impact on cattle returns.

     Table 3. KFMA Net Income per Operator by Farm Type (2002-2006)
------------------------------------------------------------------------
               No. of                Net Income per Operator
Type of Farm    Farms  -------------------------------------------------
               (2006)     2002      2003      2004      2005      2006
------------------------------------------------------------------------
All Farms        1,554   $19,343   $52,410   $63,491   $57,584   $46,804
Cash Crop        1,065    20,229    51,424    57,087    49,422    49,366
 Dryland
Cash Crop           73     9,743    57,580    62,729    64,955    92,335
 Irrigated
Stock-Ranch         33     9,291    34,148    51,366    45,396    35,986
 Cowherd
Cowherd             21     6,595    22,458    32,088    24,914    13,344
Dairy               38    22,426    24,484    71,192    52,658    25,663
Backgroundin        14    29,220    63,035    82,252    63,279   - 5,823
 g
Cash Crop-         155    17,544    33,879    49,613    50,149    31,132
 Cowherd
Cash Crop-          11    34,201    49,643    81,068    72,799    55,538
 Dairy
Cash Crop-          33     3,197    87,728    79,308    83,820     1,203
 Backgroundi
 ng
------------------------------------------------------------------------
Source: Executive Summary, 2006 Profitlink Analysis, Kansas Farm
  Management Assoc.

Government Payments
    There is little doubt that commodity subsidies have reduced the 
income variability of Kansas farms. As shown in Figure 3, from 2002-
2006, government payments averaged 60% of net farm income for KFMA 
farms. In spite of the seemingly high dependence on government 
payments, some care needs to be exercised in interpreting these 
numbers. Namely, KFMA government payment data includes all government 
payments (i.e., commodity, conservation, and disaster assistance.) 
Because conservation payments (mainly from the Conservation Reserve 
Program) are included, the importance of government payments may be 
overstated. For example, according to the 2002 Census of Agriculture, 
in 2002 nearly 29% of government payments were CRP or WRP (Wetland 
Reserve Program) payments. However, commodity program payments in 2002 
were lower than previous or subsequent years, thereby making CRP/WRP 
payments a higher percentage of total government payments. 
Nevertheless, CRP/WRP payments are a significant source of government 
payments in Kansas.


[GRAPHIC(s) NOT AVAILABLE IN TIFF FORMAT]



    Concerning the relative importance of government payments, a study 
by Dumler in 2005 determined that, from 1995-2004, farm program 
payments have been a significant factor in farm profitability. However, 
the study also determined that other factors, such as cost management 
and production have larger effects on profitability than government 
payments. Nevertheless, if government payments were reduced or 
eliminated, farm profitability would be diminished. Obviously, those 
farms that specialize in the production of farm program commodities 
would suffer larger losses than those who do not specialize in those 
commodities. In addition, larger farms would be able to absorb the loss 
of government payments better than small farms, and in many cases even 
remain profitable. On the other hand small farms were not profitable, 
on average, even with government payments.
    Although government payments have contributed a significant portion 
of net farm income in recent years, not all the benefits of government 
payments go to farmers, as a portion of those benefits gets capitalized 
into land values. This reality has two ramifications. First, it 
demonstrates that family farms are not the only beneficiaries of farm 
subsidies. Second, it indicates that as farm income would decline from 
a reduction or elimination of government payments, farm asset and 
equity values would also decline.
    A 2006 study by Kastens and Dhuyvetter estimated that average 
cropland values by state would fall by 2.3% to 40.8% if government 
payments were eliminated. Land values in Kansas would be estimated to 
fall by 30.2% if government payments were eliminated. Certainly, a 
reduction in land values of that magnitude could have a devastating 
effect on the financial viability of many farms. The estimated decline 
in land values, however, assumes that 100% of government payments are 
capitalized into land. In reality, government payments are not likely 
to be fully capitalized into land values. Moreover, the study was 
conducted prior to the rapid rise in commodity prices in the fall of 
2006. Consequently, the reduction in land values would likely be 
significantly less. This point is illustrated by a recent survey on 
farmland values. The survey by the Federal Reserve Bank of Kansas City 
indicates that in spite of decreasing commodity program payments, non-
irrigated farmland values in Kansas have increased by 7.6% from 2006 
while irrigated values have increased by 10.4%.
    Because of the relative importance of government payments in 
enhancing farm income, it is not surprising that Kansas producers would 
generally support the current three-part commodity safety net. As part 
of a recent nationwide survey on preferences for the 2007 Farm Bill, 
Kansas producers were asked to prioritize which of several existing 
programs are most important to maintain in light of potential funding 
constraints or trade-offs. The results for 10 separate programs or 
program categories are shown in Figure 4.


[GRAPHIC(s) NOT AVAILABLE IN TIFF FORMAT]



    Kansas producers placed the highest priority on maintaining funding 
for disaster assistance programs. That corresponds with producer 
preferences nationwide. The next highest priority was for direct 
payments, followed by commodity loans, and counter-cyclical payments. 
Conservation programs, including land retirement programs such as the 
Conservation Reserve Program (CRP), and working land programs such as 
the Environmental Quality Incentives Program (EQIP) and Conservation 
Security Program (CSP) ranked lower. Supporting livestock commodities 
ranked last in Kansas and nationwide. Given that the primary 
commodities grown in Kansas are farm program commodities, it is not 
surprising that Kansas producers would rank commodity programs higher 
than other programs. It is also not surprising that Kansas producers 
ranked disaster assistance over each of the three current commodity 
programs, or that direct payments would rank much higher in Kansas than 
on a nationwide basis. Overall, the results suggest that Kansas 
producers may believe the current safety net may have some significant 
holes.
    Primary support for Kansas producers since 2002 has come in the 
form of direct payments. Being decoupled from price and production, the 
primary advantage of direct payments is that they result in minimal 
market distortion in the global trade arena. For Kansas producers, the 
primary advantage of direct payments is that they have, at times, been 
the only means of support in the low yield/high price environments 
which have predominated since the passage of the 2002 Farm Bill. As 
previously mentioned, direct payments get capitalized into land values. 
But the assertion that direct payments get capitalized into land 
values, and payments from other commodity programs do not, has no 
economic validity. The capitalization process may be more transparent 
with direct payments, but it is not exclusive to direct payments.
Counter-Cyclical Revenue Proposals
    Leading up to the 2002 Farm Bill, much debate centered on the need 
to provide an enhanced safety net for crop producers when prices 
decreased. Crop producers received direct payments and marketing loan 
program payments averaging nearly $10 billion per year from 1999-2001, 
but that was deemed insufficient, and Congress intervened to provide a 
total of $19.5 billion in market loss assistance (MLA) payments over 
those 3 years. In the 2002 Farm Bill the counter-cyclical payment (CCP) 
program was created, formalizing the MLA payments into a permanent 
program.
    With two of the three commodity safety net programs tied to price, 
it is fair to say that producers of commodity program crops should be 
well covered in low price environments. But does that imply that the 
safety net is now sufficient? Given the fact that an average of $1.3 
billion in crop disaster aid has been paid out annually from 1999-2006 
suggests that the current combination of safety net programs is not 
sufficient. The primary problem with safety net programs that are tied 
to price is that they are not very effective in high price/low yield 
environments.
    Economically, there is a strong argument for a redesigned safety 
net that more effectively focuses on a bottom line revenue or net farm 
income goal instead of the current multitude of safety net tools that 
variously focus on price, production, or some mix of the two. Kansas 
producers participating in the 2007 Farm Bill preference survey ranked 
a counter-cyclical revenue program behind only bioenergy incentives 
when asked to prioritize potential new program funding (Figure 5).


[GRAPHIC(s) NOT AVAILABLE IN TIFF FORMAT]



    Several proposals have been made to convert the current price-based 
counter-cycle program to one in which payments are made when revenue 
falls below a predetermined target. These include, but are not limited 
to proposals from USDA, American Farm Bureau Federation (AFBF), the 
National Corn Growers Association (NCGA), and American Farmland Trust 
(AFT). All four of the revenue-based proposals are designed to achieve 
the same goal, but use different means to do so. Two of the proposals 
(USDA and AFT) trigger payments when national revenue falls below the 
target level. The AFBF proposal triggers payments when state revenue 
falls below the target level, while the NCGA proposal triggers payments 
when county revenue falls below the target level. Since the proposals 
use different methods to calculate the revenue target and payment when 
revenue falls below that target, they will vary in how much money will 
be distributed through them and to whom it will be distributed.
    Following are the results of a simple analysis comparing counter-
cyclical revenue proposals from USDA and the AFBF to the current price-
based CCP program. Table 4 shows the net advantage of the USDA proposal 
over the current CCP from 2002-2006 for wheat, corn, soybeans, and 
sorghum in Kansas, while Table 5 shows the net advantage of the AFBF 
proposal for those same crop years. For the primary Kansas crops, the 
USDA proposal had a $231.5 million advantage over the current CCP 
program and a $79.6 million advantage over the AFBF proposal from 2002-
2006. The USDA proposal resulted in higher payments for all crops 
except grain sorghum. When compared to the current CCP program, corn 
was the only crop that received lower payments under the AFBF proposal. 
Most of the support under both proposals would have come in 2002, a low 
income year for Kansas farmers, while fewer payments would have been 
made in 2004 and 2005.

                Table 4. Net Advantage of USDA Proposal Over Current CCP From 2002-2006 in Kansas
----------------------------------------------------------------------------------------------------------------
       Year               Wheat               Corn             Sorghum            Soybeans            Total
----------------------------------------------------------------------------------------------------------------
Million Dollars
----------------------------------------------------------------------------------------------------------------
          2002               164.6              103.4               51.0               13.0              332.0
          2003                 0.0                0.0               19.2                0.0               19.2
          2004                 0.0             - 36.7             - 56.4                0.0             - 93.1
          2005                 0.0               29.8             - 56.4                0.0             - 26.6
          2006                 0.0                0.0                0.0                0.0                0.0
                   ---------------------------------------------------------------------------------------------
  Total...........           164.6               96.5             - 42.6               13.0              231.5
----------------------------------------------------------------------------------------------------------------


                Table 5. Net Advantage of AFBF Proposal Over Current CCP From 2002-2006 in Kansas
----------------------------------------------------------------------------------------------------------------
       Year               Wheat               Corn             Sorghum            Soybeans            Total
----------------------------------------------------------------------------------------------------------------
Million Dollars
----------------------------------------------------------------------------------------------------------------
          2002                76.0               51.0               99.8               51.9              278.7
          2003                 0.0                0.7               88.3                0.0               89.0
          2004                 0.0             - 68.7             - 56.4                0.0            - 125.1
          2005                 0.0             - 34.3             - 56.4                0.0             - 90.7
          2006                 0.0                0.0                0.0                0.0                0.0
                   ---------------------------------------------------------------------------------------------
  Total...........            76.0             - 51.3               75.3               51.9              151.9
----------------------------------------------------------------------------------------------------------------

    Tables 6, 7, and 8 show how the current CCP program compares to the 
USDA and AFBF revenue proposals using data from the Kansas Farm 
Management Association from 2002-2005. As expected, results correspond 
with state totals. Both the USDA and AFBF programs would have provided 
more income to Kansas farms than the current CCP program. In addition, 
the USDA proposal, on average, resulted in larger payments per farm 
than the AFBF proposal. Also, the AFBF proposal performs better for 
sorghum, but worse for wheat and corn.

                  Table 6. Estimated Payments for KFMA Farms With 2002 Price-Based CCP Program
----------------------------------------------------------------------------------------------------------------
                          Wheat               Corn             Sorghum            Soybeans            Total
----------------------------------------------------------------------------------------------------------------
$/Farm
----------------------------------------------------------------------------------------------------------------
          2002                   0                  0                  0                  0                  0
          2003                   0                  0                  0                  0                  0
          2004                   0              3,744              2,701                  0              6,445
          2005                   0              5,231              2,759                  0              7,990
                   ---------------------------------------------------------------------------------------------
  Average.........               0              2,244              1,365                  0              3,609
----------------------------------------------------------------------------------------------------------------


                 Table 7. Estimated Payments for KFMA Farms With USDA Revenue-Based CCP Program
----------------------------------------------------------------------------------------------------------------
                          Wheat               Corn             Sorghum            Soybeans            Total
----------------------------------------------------------------------------------------------------------------
$/Farm
----------------------------------------------------------------------------------------------------------------
          2002               7,679              4,898              2,355                521             15,453
          2003                   0                  0                900                  0                900
          2004                   0              1,539                  0                  0              1,539
          2005                   0              5,497                  0                  0              5,497
                   ---------------------------------------------------------------------------------------------
  Average.........           1,920              2,984                814                130              5,847
----------------------------------------------------------------------------------------------------------------


                 Table 8. Estimated Payments for KFMA Farms With AFBF Revenue-Based CCP Program
----------------------------------------------------------------------------------------------------------------
                          Wheat               Corn             Sorghum            Soybeans            Total
----------------------------------------------------------------------------------------------------------------
$/Farm
----------------------------------------------------------------------------------------------------------------
          2002               3,594              2,546              4,790              2,999             13,929
          2003                   0                 36              4,255                  0              4,291
          2004                   0                  0                  0                  0                  0
          2005                   0              2,519                  0                  0              2,519
                   ---------------------------------------------------------------------------------------------
  Average.........             899              1,275              2,261                750              5,185
----------------------------------------------------------------------------------------------------------------

    The revenue proposals considered in the analysis offer the 
opportunity to provide assistance to producers over a broader array of 
economic scenarios. That does not imply that the programs will always 
be superior to the current CCP program, but because the proposals are 
tied to revenue instead of price, they offer the possibility to provide 
assistance when producers need it most and therefore reduce the need 
for ad hoc disaster assistance.
References
    Dumler, T.J. 2005. Impact of U.S. Farm Programs on Kansas Farms. 
Agricultural Lenders Conference. Garden City and Abilene, KS.
    Dumler, T.J. 2007. The 2007 Farm Bill: Kansas Producer Preferences 
for Agricultural, Food, and Public Policy. www.agmanager.info. May 
2007.
    Henderson, J. and M. Akers. 2007. Survey of Tenth District 
Agricultural Conditions. Federal Reserve Bank of Kansas City. 1st 
Quarter 2007.
    Kastens, T. and K. Dhuyvetter. Government Program Payments and Non-
agricultural Returns Affect Land Values. www.agmanager.info. September 
2006.
    USDA-NASS. (2004) 2002 Census of Agriculture. Vol. 1, Part 16. 
Washington, D.C., USDA-NASS.
                                 ______
                                 
              Impact of U.S. Farm Programs on Kansas Farms

 Troy J. Dumler, Extension Agricultural Economist, Southwest, K-State 
             Research and Extension, Garden City, KS 67846

Impact of U.S. Farm Programs on Kansas Farms
    U.S. farm subsidies have faced increased scrutiny in recent years. 
Groups representing consumer, environmental, and international 
competitor interests have stepped up efforts to persuade developed 
countries to reduce or eliminate farm subsidies. The increased coverage 
of these interest groups in the media coupled with successful 
challenges of farm subsidies in the WTO and record domestic budget 
deficits result in a negative outlook for the future of U.S. farm 
subsidies. The President's 2006 Budget Proposal provided a possible 
glimpse into the future of U.S. farm subsidies. However, the reaction 
to that proposal also demonstrated that support for these programs 
remains strong in production agriculture.
    Whether U.S. farm subsidies should be reduced or eliminated can be 
debated extensively from an economic and social standpoint. That is not 
the purpose of this paper, however. Rather, this paper will determine 
the relative impact that U.S. farm program payments have on Kansas 
farms, and evaluate the economic consequences of reducing or 
eliminating government payments.
Who Receives Farm Subsidies?
    Before any changes to farm payments are evaluated, it is important 
to develop a baseline regarding who receives farm subsidies and how 
large those subsidies are. It is also important to understand the 
different types and sizes of farms in the U.S. and how government 
payments are dispersed to those farms. In the 2004 Family Farm Report 
from the Economic Research Service (ERS) of USDA, farms were split into 
three primary categories: small family farms, other family farms, and 
nonfamily farms. The definition of small family farms in this 
categorization would be those farms with annual gross sales of less 
than $250,000. Other family farms are those with annual gross sales of 
$250,000 or more, and nonfamily farms are those that are ``organized as 
nonfamily corporations or cooperatives, as well as farms operated by 
hired managers'' (Banker and MacDonald 2005).
    In the 2004 Family Farm Report, small farms are further separated 
into five different categories. These small family farm categories are 
(1) limited-resource farms, (2) retirement farms, (3) residential/
lifestyle farms, (4) low-sales farming occupation farms, and (5) high-
sales farming occupation farms. Limited resource farms are those with 
sales less than $100,000, farm assets less than $150,000, and total 
operator household income less than $20,000. Retirement farms are small 
farms whose operators report they are retired. Residential/lifestyle 
farms are small farms whose operators report a major occupation other 
than farming. Low-sales farming-occupation farms are small farms whose 
operators report farming as their major occupation and have sales less 
than $100,000. High-sales farming-occupation farms are small farms 
whose operators report farming as their major occupation and have sales 
between $100,000 and $249,999. Other family farms are further separated 
into large family farms, and very large family farms. Large family 
farms are those farms that have sales between $250,000 and $499,999. 
Very large family farms are the farms that have sales of $500,000 or 
more.
    Small farms (all those with sales under $250,000) comprise 91% of 
the farms in the U.S., but only 28% of the value of production. 
Conversely, large and very large family farms constitute nearly 7% of 
U.S. farms, but are responsible for 58% of the value of production. The 
remaining 14% of agricultural production comes from nonfamily farms 
(Banker and MacDonald 2005).
    Broken down further, limited-resource, retirement, and residential/
lifestyle farms account for nearly 60% of the farms, yet provide only 
6% of the value of production. Moreover, 55% of small farms had sales 
under $10,000. However, small farms held 68% of farm assets, including 
60% of the land. Furthermore, small farms produce a large percentage of 
the major commodities, including 60% of the value of production for 
hay, 45% for soybeans, 47% for wheat, 39% for corn, and 38% for beef 
(Banker and MacDonald 2005). Based on this information, it can be 
argued that both small and large farms have an important role in 
production agriculture in the United States.
    Focusing on government payments, from 1996-2003 commodity program 
payments (production flexibility contracts, direct payments, counter-
cyclical payments, loan deficiency payments, and marketing loan gains) 
accounted for nearly 59% of the average annual farm program payments of 
$14.9 billion. Commodity payments were followed by ad hoc and emergency 
payments which accounted for over 27% of average farm payments, and 
conservation payments at 12% of total payments (USDA-ERS 2004).
    High-sales small farms, large family farms, and very large family 
farms receive approximately 75% of commodity program payments. However, 
that percentage is roughly equivalent to the percentage of program 
commodities that they produce. Conversely, over 50% of Conservation 
Reserve Program (CRP) payments, which make up the majority of 
conservation payments, are received by retirement and residential/
lifestyle farms. In fact 25% of retirement farms receive CRP or Wetland 
Reserve Program (WRP) payments. Only 10% of residential/lifestyle farms 
receive CRP or WRP payments, but they comprise 44% of all farms, and 
enroll an average of 44% of their land in the program--compared to 25% 
for all participating farms (Banker and MacDonald 2005).
Farms and Government Payments in Kansas
    In Kansas, small farms in 2002 (i.e., those with sales less than 
$100,000) comprised nearly 82% of all farms (table 1). However, they 
accounted for less than 10% of all sales, but received over 42% of all 
government payments (table 2). By contrast, large farms (i.e., those 
with sales over $250,000) made up only 7.5% of all farms, but provided 
nearly 79% of all sales and received 34% of all government payments 
(USDA-NASS 2004). In 2002, nearly 29% of government payments were CRP 
or WRP payments. However, commodity program payments in 2002 were lower 
than previous or subsequent years, thereby making CRP/WRP payments a 
higher percentage of total government payments. Nevertheless, CRP/WRP 
payments are a significant source of government payments in Kansas. 
Although CRP/WRP payments are significant, they vary across farm types 
and locations in Kansas. Since farm typology data is not available on a 
state-level basis, this paper will not discuss, in-depth, the 
differences in government payments (including CRP/WRP) across typology 
groups. Rather, specific attention will be given to the relative 
importance of government payments on a county and farm-level basis in 
Kansas.

 Table 1. Number of Farms and Total Sales By Market Value of Ag Products
                                  Sold
------------------------------------------------------------------------
 Ag Market Value of      No. of     % of Total  Total Sales   % of Total
        Sales            Farms        Farms       ($1,000)      Sales
------------------------------------------------------------------------
Less than $1,000            7,214         11.2        1,061          0.0
$1,000 to $2,499            6,647         10.3        5,826          0.1
$2,500 to $4,999            6,764         10.5       14,754          0.2
$5,000 to $9,999            7,961         12.4       39,504          0.5
$10,000 to $24,999         10,464         16.2      138,201          1.6
$25,000 to $49,999          7,159         11.1      222,946          2.5
$50,000 to $99,999          6,513         10.1      425,723          4.9
$100,000 to $249,999        6,858         10.6    1,015,924         11.6
$250,000 to $499,999        2,896          4.5      942,898         10.8
$500,000 to $999,999        1,214          1.9      794,074          9.1
$1,000,000 to                 473          0.7      689,078          7.9
 $2,499,999
$2,500,000 to                  97          0.2      325,124          3.7
 $4,999,999
$5,000,000 or more            154          0.2    4,131,131         47.2
                     ---------------------------------------------------
  Total                    64,414           --    8,746,244           --
------------------------------------------------------------------------
Source: 2002 Census of Agriculture: Kansas.


    Table 2. Number of Farms Receiving Government Payments and Total
         Government Payments By Market Value of Ag Products Sold
------------------------------------------------------------------------
                         No. of
 Ag Market Value of      Farms     Total Govt.   % of Total  Govt. Pmts.
        Sales          Receiving     Payments    Government   as a % of
                      Govt. Pmts.    ($1,000)     Payments   Total Sales
------------------------------------------------------------------------
Less than $1,000            1,333          642          0.2         60.5
$1,000 to $2,499            3,690        5,313          1.6         91.2
$2,500 to $4,999            3,703        9,811          3.0         66.5
$5,000 to $9,999            4,541       17,375          5.3         44.0
$10,000 to $24,999          6,376       31,654          9.6         22.9
$25,000 to $49,999          5,043       32,660          9.9         14.6
$50,000 to $99,999          4,991       41,418         12.6          9.7
$100,000 to $249,999        5,579       77,698         23.7          7.6
$250,000 to $499,999        2,421       56,828         17.3          6.0
$500,000 to $999,999        1,009       32,655          9.9          4.1
$1,000,000 to                 379       17,796          5.4          2.6
 $2,499,999
$2,500,000 to                  56        2,405          0.7          0.7
 $4,999,999
$5,000,000 or more             70        1,988          0.6          0.0
                     ---------------------------------------------------
  Total                    39,191      328,243           --           --
------------------------------------------------------------------------
Source: 2002 Census of Agriculture: Kansas.

    Without question, farms in Kansas differ due to climate, 
typography, and proximity to population centers. Average annual 
precipitation varies from over 42 inches in the southeast corner of the 
state to under 16 inches on the western border. Much of eastern Kansas 
is dominated by rolling grasslands, small, irregular-shaped fields, and 
woodland areas. In contrast, a large portion of western Kansas is 
dominated by flat cropland with deep soils. These differences are 
critical in understanding agriculture in Kansas, and understanding how 
policy changes may affect farms in the state.
    Since commodity programs constitute the majority of government 
payments in both the U.S. and Kansas, farms specializing in crop 
production obviously will be impacted more by potential reductions in 
government payments than predominately livestock and non-program 
commodity farms. Therefore, counties in Kansas that have a higher 
percentage of land in crops will likely be affected more than those 
counties with larger amounts of grassland. Tables 3 and 4 show how the 
counties differ across Kansas by crop reporting district.

  Table 3. Average Number of Farms, Crop Farms, and Percentage of Crop
               Farms per County by Crop Reporting District
------------------------------------------------------------------------
  Crop Reporting       Avg. No. of    Avg. No. of Crop   Avg. % of Crop
     District       Farms per County  Farms per County  Farms per County
------------------------------------------------------------------------
     Northwest                 429               398              92.8
  West Central                 360               331              91.9
     Southwest                 388               346              89.2
 North Central                 554               507              91.5
       Central                 725               660              91.0
 South Central                 709               645              91.0
     Northeast                 762               666              87.4
  East Central                 745               641              86.0
     Southeast                 729               585              80.2
------------------------------------------------------------------------
Source: 2002 Census of Agriculture: Kansas.


Table 4. Average Land in Farms and Cropland per County by Crop Reporting
                                District
------------------------------------------------------------------------
                                                Avg. % of
                 Avg. Land in  Avg. Cropland    Cropland        Avg.
Crop Reporting    Farms per     in Farms per   from Total   Cropland per
   District         County         County     Farm Land by    Crop Farm
                                                 County
------------------------------------------------------------------------
   Northwest         567,372        384,497           67.8           967
West Central         512,178        357,399           69.8         1,080
   Southwest         497,894        362,517           72.8         1,047
North Central        479,105        295,323           61.6           582
     Central         505,047        326,647           64.7           495
South Central        528,565        349,276           66.1           542
   Northeast         297,276        181,715           61.1           273
East Central         321,691        161,545           50.2           252
   Southeast         402,723        180,820           44.9           309
------------------------------------------------------------------------
Source: 2002 Census of Agriculture.

    These tables show that while there is not much difference in terms 
of the average number of crop farms to total farms per county from east 
to west, there is a noticeable difference in average amount of cropland 
to farmland per county across regions in Kansas. For example, 72.8% of 
the average land in farms per county in southwest Kansas is cropland, 
compared to only 44.9% in southeast Kansas. Since counties in southwest 
Kansas have more land in farms, a higher percentage of cropland, and 
fewer farms, the average crop farm in western Kansas farms over three 
times the acreage of the average farm in eastern Kansas.
    Average county and farm level net income and government payments 
from 1994-2003 are shown in table 5. Most notably, both on a county and 
farm basis, government payments exceed net income in all districts 
except west central and southwest Kansas. Also, net income and 
government payments are substantially higher in western Kansas than in 
the eastern districts of the state. The higher government payments on a 
county basis can be explained by the fact that farms in the west tend 
to be more crop oriented (see tables 3 and 4), and, on average, have 
higher levels of production through irrigation. Higher production, both 
historically (when direct payment yields were frozen), and currently 
(for marketing loan benefits), will result in higher payments for farms 
and counties that grow program commodities. Because farms in the west 
are also significantly larger in terms of acreage, it is also expected 
that income and government payments would be higher on a farm basis.

   Table 5. Average Net Farm Income * and Government Payments by Crop
                     Reporting District (1994-2003)
------------------------------------------------------------------------
                  Avg. NFI/      Avg. Govt.                  Avg. Govt.
Crop Reporting      County      Pmts/County     Avg. NFI/     Pmts/Farm
   District        ($1,000)       ($1,000)      Farm ($)         ($)
------------------------------------------------------------------------
   Northwest           8,123         10,931         18,935        25,481
West Central           9,120          8,998         25,324        24,988
   Southwest          15,062         11,569         38,784        29,789
North Central          7,057          8,466         12,731        15,274
     Central           6,209          7,688          8,561        10,600
South Central          5,934          9,769          8,366        13,772
   Northeast           4,838          5,144          6,348         6,750
East Central           2,182          3,108          2,929         4,173
   Southeast           2,038          3,322          2,797         4,560
------------------------------------------------------------------------
* Net Farm Income equals Total Net Farm Proprietors' Income. According
  to the Bureau of Economic Analysis this number consists of the net
  income that is received by sole proprietorships and partnerships that
  operate farms. It excludes the income that is received by non-family
  farm corporations.

    While it is not unexpected that net income and government payments 
would be higher in the west, it may be surprising to some that portions 
of western Kansas may be less dependent on government payments (i.e., 
have net income greater than government payments) than eastern Kansas. 
After all, western Kansas is more crop intensive than eastern Kansas. 
However, there may be several explanations regarding why portions of 
western Kansas are less dependent on government payments.
    First, a larger portion of small farms tend to reside in the east. 
Although farm typology data is not currently available regarding those 
small farms, it is likely that there are more residential/lifestyle 
farms in the east than the west. These farms are often not as concerned 
about earning a living from farming as simply enjoying the farm 
lifestyle.
    Second, since direct payment yields and acreage bases were largely 
frozen in the mid-1980s, farms in the west intensified cropping 
rotations and shifted the overall crop mix. Consequently, these farms 
may actually be moving toward receiving a larger percentage of revenue 
from the market rather than government payments. In contrast, eastern 
Kansas may have already been farming at a higher cropping intensity, 
which would thus be reflected in their direct payment yield and acreage 
base. (Of course, benefits from the marketing loan program are based on 
current production which would lessen this overall effect.)
    Third, CRP payments could distort the relative importance of 
government payments as a contributor to net income. For example, some 
counties enrolled larger percentages of cropland into the program than 
other counties. Those counties that have a large percentage of cropland 
in CRP would then appear to be receiving a larger portion of net income 
on a county and farm basis from government payments than is actually 
occurring. In other words, counties and farms are not as dependent on 
government payments as the numbers indicate.
    Finally, various events such as droughts and fluctuations in 
livestock prices affect the relative relationship between government 
payments and net income. For example, northwest Kansas was especially 
hit hard by drought from 2000-2003. To help those who were affected by 
those conditions, disaster legislation was passed and emergency 
disaster payments were distributed to farmers. Obviously, in 
circumstances such as these, government payments could increase in 
importance in terms of contributing to net farm income on a county 
basis. Also, if overall net income is depressed because of poor cattle 
prices for instance, then government payments will again appear to 
contribute a greater portion of net income.
    While it is interesting to evaluate the importance of government 
payments for farms in Kansas on an aggregate basis, care must be taken 
when drawing conclusions. Aggregating income and payment data may end 
up masking important trends and relationships. Furthermore, little can 
be said in terms of how changes in farm programs may impact individual 
farms. Therefore, the remainder of this paper will focus on the impact 
of government payments on farms in the Kansas Farm Management 
Association (KFMA). Using KFMA data, more precise analysis can be 
performed.
Impact of Government Payments Using KFMA Data
    Data from farms that were continuously enrolled in the KFMA from 
1995-2004 were used to study the relationship between government 
payments and farm financial performance. The entire data set contained 
9,630 farm-year observations. In determining these relationships, a 
2001 study by Dumler that determined the relationship between farm size 
and profitability was used as a foundation for this study. Following 
the 2001 study, farms were separated into three regions: east, central, 
and west. Since farm size issues have become mainstay topics for farm 
policy debates, in this study, farms were also divided into four size 
categories. These size categories basically follow the major categories 
of 2004 Family Farm Report. Thus, the four farm size categories based 
on gross farm income (GFI) are: small farms under $100,000 GFI, medium 
farms with GFI from $100,000 to $249,999, large farms with GFI from 
$250,000 to $499,999, and very large farms with GFI over $500,000.
Farms by Area
    Following is a brief description of how farms compared in the three 
regions of the state. As previously mentioned, farms in Kansas differ 
across the state in climate and typography. However, the average farms 
in the KFMA data set are quite similar across regions (table 6). In 
terms of total government payments, the average farm in the west had 
payments that were nearly 82% higher than the average farm in the east, 
and almost 49% greater than the average farm in central Kansas. 
Likewise, as a percentage of gross farm income (GFI), government 
payments in western Kansas (18.9%) were nearly double that of the east 
(10.7%). The central region fell in between this range at 14.5%. On a 
total crop acre basis, however, government payments in each region are 
within $2.65/acre.

  Table 6. Financial and Production Measures for KFMA Farms in Kansas,
                                1995-2004
------------------------------------------------------------------------
          Measure           Units      East       Central        West
------------------------------------------------------------------------
Total Govt. Payments           $        23,151       28,231       41,972
Govt. Payments/Acre            $         26.30        24.00        26.65
Govt. Payments/GFI             %          10.7         14.5         18.9
Gross Farm Income (GFI)        $       247,453      212,942      254,004
Net Farm Income * (NFI)        $        19,834       10,130       11,503
Total Expense Ratio            %         105.1        105.2        105.0
Total Assets                   $       725,440      607,938      781,818
Total Capital Managed          $     1,380,247    1,288,509    1,486,091
Rate of Return to Capital      %           1.6          1.1          1.7
 Managed (RRCM)
Avg. Debt/Equity Ratio         %          83.8        102.8         86.4
Crop Income/GFI                %          48.1         57.9         57.9
Livestock Income/GFI           %          35.0         22.4         16.6
Non-farm Wages                 $        11,114        8,168        8,429
Total Crop Acres             No.           915        1,182        1,730
Acres Harvested              No.           958        1,132        1,189
------------------------------------------------------------------------
* Net Farm Income equals gross farm income minus operating expenses,
  depreciation, unpaid operator labor, and unpaid family labor.

    Table 6 shows several other interesting financial and production 
measures as well. For instance, as expected, eastern farms earn a 
higher percentage of GFI from livestock than crops. Moreover, as 
expected, farms in the west were larger, in terms of total acreage, but 
had a lower cropping intensity (acres harvested/total crop acres). 
Nevertheless, the financial measures across regions were similar.
    In the 2001 farm size study by Dumler, the primary profitability 
ratio used was rate of return to capital managed (RRCM). Capital 
managed equals total farm assets plus the value of rented land. Thus, 
the RRCM formula, shown below in equation 1, is:

RRCM = (Net Farm Income + Interest Expense)/Total Capital Managed,    
        (1)

where net farm income equals gross farm income minus operating 
expenses, depreciation, and unpaid labor charges. Although RRCM is not 
one of the 16 standard farm financial ratios, it is very similar to 
rate of return on assets. The only difference is that RRCM includes the 
value of rented land in addition to total assets. Capital managed was 
used instead of total assets because it gives a broader indication of 
farm size. The average RRCM per region ranged from 1.1% in central 
Kansas to 1.7% in western Kansas.
    Another important financial measure in table 6 is the total expense 
ratio. The total expense ratio, shown in equation 2, indicates how much 
it costs to produce each dollar of gross income.

Total Expense Ratio = Total Expenses/Gross Farm Income.    (2)

    The lower the total expense ratio--the greater cost efficiency (and 
potentially higher net returns). Like RRCM, the total expense ratio was 
nearly identical for all three regions. In fact all three areas were 
within 0.2% of each other. Obviously, a ratio above 100% is a concern, 
but it should be noted that unpaid operator and family labor are 
included in total expenses, resulting in a ratio that is higher than 
would typically be expected.
Farms by Size
    Although the average farm in the KFMA is similar across regions, 
significant differences exist between farms when separated into size 
categories according to gross farm income. Table 7 shows selected 
financial and production measures for KFMA farms by farm size.Notably, 
government payments for very large farms are over six times as large as 
those for small farms. However, government payments per acre for very 
large farms are less than 50% greater than those for small farms. In 
addition, very large farms earn a smaller percentage of gross farm 
income from government payments than do their smaller counterparts. The 
differences between farms, in terms of government payments, are not 
surprising. Certainly, it is expected that large farms would receive 
greater amounts of payments since they farm larger acreages. It is also 
expected that payments per acre may be greater since the size of farms 
in this study are determined by gross income. Thus, farms producing 
high yielding program commodities (i.e., irrigated corn) would likely 
earn a higher income, and potentially higher government payments on a 
per acre basis. Finally, larger farms have demonstrated the ability to 
achieve lower costs and higher yields, thereby making government 
payments a smaller portion of gross farm income.

Table 7. Financial and Production Measures for KFMA Farms by Size, 1995-
                                  2004
------------------------------------------------------------------------
                                                                  Very
       Measure         Units    Small      Medium     Large      Large
------------------------------------------------------------------------
Total Govt. Payments      $      10,194     22,674     40,576     66,942
Govt. Payments/Acre       $       22.56      24.90      27.72      31.49
Govt. Payments/GFI        %        15.6       13.6       11.7        9.3
Gross Farm Income         $      66,469    166,315    348,371    755,987
 (GFI)
Net Farm Income *         $    - 20,022      1,032     37,222    123,917
 (NFI)
Total Expense Ratio       %       136.1      100.8       89.6       84.5
Total Assets              $     382,596    569,797    914,160  1,584,294
Total Capital Managed     $     644,087  1,152,746  1,867,243  3,039,967
Rate of Return to         %       - 2.5        1.4        3.8        6.1
 Capital Managed
 (RRCM)
Avg. Debt/Equity          %        67.6       90.7      106.8      106.6
 Ratio
Crop Income/GFI           %        49.3       54.3       55.4       48.4
Livestock Income/GFI      %        28.8       26.6       26.7       35.3
Non-farm Wages            $      13,770     10,196      7,016      3,628
Total Crop Acres        No.         506      1,005      1,577      2,272
Acres Harvested         No.         440        906      1,492      2,246
------------------------------------------------------------------------
* Net Farm Income equals gross farm income minus operating expenses,
  depreciation, unpaid operator labor, and unpaid family labor.

    While the government payment information by farm size is 
interesting, it does not tell the whole story in terms of the relative 
importance of government payments for farms in Kansas. It is also 
important to understand the financial characteristics of the different 
size farms. The most telling financial differences between farm sizes 
are profitability and expense management. As shown in table 7, 
profitability, as measured by RRCM, varies from - 2.5% for small farms 
to 6.1% for very large farms. While, in terms of percentage points the 
difference seems small, the difference in profitability between farm 
sizes is actually quite large. For example, very large farms earn over 
four times the return on capital than medium size farms. In another 
major difference between farms, the total expense ratio drops from 
136.1% for small farms to 84.5% for very large farms. This suggests 
that cost management is a significant factor in farm profitability. It 
also suggests that large farms have some cost advantages over small 
farms, or that large farms were able to grow over time because they 
were efficient cost managers. Otherwise, many of the remaining 
financial measures are not very dissimilar, or generally follow 
expectations based on how the farms were classified. Of the remaining 
variables, the most interesting is the debt/equity ratio. Unlike what 
many would expect, small farms actually have the lowest debt/equity 
ratio, meaning they have lower debt loads than larger farms.
Farm by Type
    When discussing government payments by area and farm size, it was 
hypothesized that government payments in the west were higher than 
those in the east because of irrigation. Likewise, since irrigation 
usually results in greater production than non-irrigation, it would be 
expected that government payments would be higher as well. As table 8 
shows, total government payments and payments per acre were larger for 
irrigated farms.

    Table 8. Financial and Production Measures for Irrigated and Non-
                irrigated KFMA Farms in Kansas, 1995-2004
------------------------------------------------------------------------
                                                                 Non-
                Measure                  Units   Irrigated    irrigated
------------------------------------------------------------------------
Total Govt. Payments                        $        49,340       30,831
Govt. Payments/Acre                         $         36.72        23.99
Govt. Payments/GFI                          %          15.4         15.5
Gross Farm Income (GFI)                     $       340,594      222,114
Net Farm Income * (NFI)                     $        30,008       15,009
Total Expense Ratio                         %          97.0        105.0
Total Assets                                $       808,074      671,815
Total Capital Managed                       $     1,583,416    1,382,611
Rate of Return to Capital Managed           %           3.1          1.4
 (RRCM)
Avg. Debt/Equity Ratio                      %         106.3         91.6
Crop Income/GFI                             %          71.5         64.5
Livestock Income/GFI                        %           6.3         13.7
Non-farm Wages                              $         8,453        9,874
Total Crop Acres                          No.         1,456        1,298
Acres Harvested                           No.         1,224        1,215
------------------------------------------------------------------------
* Net Farm Income equals gross farm income minus operating expenses,
  depreciation, unpaid operator labor, and unpaid family labor.

Statistical Model
    A statistical model was developed from the KFMA data set to 
quantify the relationship between profitability and several other 
explanatory variables, including government payments. The profitability 
measure used in the statistical models was rate of return to capital 
managed. The purpose of this extensive model was to quantify the effect 
that these variables had on RRCM. The model can be expressed as:

RRCM = B0 + B1YEAR + B2 GOVTPP + 
        B3CINCP + B4 TEXPR + B5AVGDE + 
        B6AVGDE2 + B7GFI + 
        B8GFI2,

where YEAR is a binary, or ``dummy'' variable that allows for changes 
in RRCM over time (year is defined as 1995 = 95, etc.), GOVTPP is the 
percentage of gross income earned from government payments, CINCP is 
the percentage of gross income earned from crops, TEXPR is the total 
expense ratio, AVGDE is the average debt/equity ratio, and GFI is gross 
farm income. Squared terms on AVGDE and GFI allow for non-linear 
relationships with RRCM.

    The results of this model are shown in table 9. The R2 
value, at 71.2%, indicates the amount of variability in RRCM that is 
explained by the other variables. Thus, 71.2% of the variability in 
RRCM can be explained by the six independent variables in the model. 
Two of the most important things to consider when interpreting the 
results of the regression model are the sign of the coefficient and 
whether or not the variable is statistically different from zero. 
Beginning with the YEAR variable, we can see from table 9 that RRCM was 
statistically different from the base year (2004) in 7 of the 9 years 
from1995 through 2004.

        Table 9. Regression Results for KFMA Profitability Model
------------------------------------------------------------------------
        Variable                Coefficient             t-statistic
------------------------------------------------------------------------
        Intercept                    0.1099                   62.13
             1995                  * 0.0050                    3.86
             1996                  * 0.0148                   11.72
             1997                  * 0.0113                    9.00
             1998                * - 0.0030                  - 2.33
             1999                  - 0.0011                  - 0.78
             2000                * - 0.0044                  - 3.27
             2001                * - 0.0046                  - 3.50
             2002                * - 0.0027                  - 2.13
             2003                * - 0.0038                  - 2.98
            GVTPP                  * 0.0154                    4.44
            CINCP                * - 0.0025                  - 2.27
            TEXPR                * - 0.1055                - 102.37
            AVGDE                  * 0.0036                   10.21
           AVGDE2                * - 0.0002                  - 6.27
              GFI                  * 0.0001                   16.45
             GFI2                * - 0.0000                  - 2.63
------------------------------------------------------------------------
* Indicates significantly different from zero at 0.05 level.
* 2004 is the base year.

    The general purpose of government payments is to provide a safety 
net for farmers in an economic environment where many forces are out of 
their control. Because these payments are designed to boost farm 
income, it would be reasonable to expect that government payments would 
be an important variable in determining RRCM. The percent of gross farm 
income from government payments (GVTPP) was used instead of total 
government payments because it also gives an indication of the crop/
livestock mix of the farm. GVTPP is statistically significant and 
positive, meaning that as the percentage of GFI earned from government 
payments increases, RRCM increases as well. However, for every 1% 
increase in GVTPP, RRCM increases by only 0.015%.
    The CINCP variable was included in the model to determine whether 
the crop/livestock mix of a farm had any impact on RRCM. According to 
this model, as the percentage of gross income earned from crops 
increases, RRCM decreases. Although, this variable is statistically 
significant, like GVTPP, the effect is small.
    The total expense ratio (TEXPR), defined on page eight, gives an 
indication of how well a farm manages costs, which in turn will affect 
profitability. The TEXPR variable in the model is highly significant 
and negative, meaning that for every 1% increase in TEXPR, RRCM will 
decrease by about 0.1%. For example, assume that a farm had a total 
expense ratio of 90% and a corresponding RRCM of 5%. If the total 
expense ratio increased to 91%, and everything else was held constant, 
RRCM would fall to 4.9%.
    An average debt/equity ratio (AVGDE and AVGDE2) was 
included in this model to determine the impact debt may have on 
profitability. According to the regression results, as the average 
debt/equity increases (i.e., a farm is more highly leveraged), RRCM 
increases as well, but at a decreasing rate. Again, this variable is 
statistically significant, but its impact is minor. This indicates 
that, on average, farms in the KFMA are using their borrowed funds to 
earn positive returns on their operations. Of course, caution should be 
used in increasing leverage as cash flow problems can develop.
    The final variable is gross farm income (GFI and GFI2). 
As previously mentioned, a squared term for GFI was included in the 
model to allow for a non-linear relationship between GFI and RRCM. In 
the model both variables are statistically significant, with GFI 
positive and GFI2 negative, indicating that as farms get 
bigger--in terms of GFI, RRCM increases, but at a decreasing rate. By 
holding all other variables constant and varying GFI and 
GFI2, we can determine the point at which RRCM levels off 
with continued increases in GFI. Figure 1 shows that RRCM increases 
until GFI reaches $4.3 million. At that point GFI plateaus and then 
starts to decrease. This result would suggest that profitability is 
maximized with GFI of $4.3 million. However, extreme care must be taken 
in making that assertion. First, data on large farms is limited in the 
KFMA, making projections at higher levels of GFI more problematic. For 
example, the maximum GFI for a farm in the data set used to derive this 
model was $2.8 million. Second, in order to predict RRCM as GFI 
increases, all other variables were held constant. However, as previous 
data showed, as farm size increased, TEXPR decreased. Since this 
variable was held constant to illustrate the relationship between RRCM 
and GFI, the advantage most large farms have in terms of costs are 
eliminated, making it appear that economies of size are maximized at 
$4.3 million in GFI.


[GRAPHIC(s) NOT AVAILABLE IN TIFF FORMAT]



    The preceding statistical model indicates that government payments 
are a significant factor in the overall financial performance of a 
farm. However, the same model also shows that increasing the percentage 
of GFI that comes from government payments has less of an impact on 
profitability than other variables. Expenses and total revenue have a 
greater impact on profitability than government payments do. It is 
important to understand this when evaluating farm policy alternatives. 
In today's farm policy environment there are government officials and 
interest groups who are advocating reductions in payments or even the 
complete elimination of farm subsidies. Some of the information 
previously presented would seem to suggest that, on average, farms may 
be able to absorb a reduction in government payments without a 
catastrophic reduction in profitability. This may be especially true 
with larger farms. At the same time there is the realization that in 
some years, government payments were a vital contributor to gross 
income (figure 2).


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Loss of Government Payments
    To further determine the impact of government payments on farm 
profitability, additional analysis was performed with the KFMA data 
set. In this analysis, scenarios in which government payments were 
reduced by 10%, and completely eliminated were developed. Without 
question, it would be expected that both gross and net income would 
fall if government payments were reduced or eliminated immediately, and 
everything else remained constant. However, reducing or eliminating 
government payments will likely have consequences outside of simply 
reducing income. Most notably, land values would likely fall as 
government payments dropped. A study by Kastens and Dhuyvetter 
estimated that cropland values in Kansas would fall by 33.3% if 
government payments were eliminated. A reduction in land values of that 
magnitude could have a devastating effect on the financial viability of 
many Kansas farms. The estimated decline in land values, however, 
assumes that 100% of government payments are capitalized into land. In 
reality, government payments are not likely to be fully capitalized 
into land values.
    Nevertheless, using the assumption that government payments are 
fully capitalized into land values provides a ``worst case scenario'' 
in terms of the impact of a reduction in government payments. This 
could also be considered a ``worst case scenario'' because cash rent 
for cropland was not reduced in conjunction with land values. This was 
necessary because the KFMA data does not distinguish between crop, 
pasture, and other cash rent.
    To account for the fact that government payments get capitalized 
into land values, in this analysis, land values were reduced by 3.3% in 
the scenario in which government payments were reduced by 10%, and by 
33.3% in the scenario in which government payments were completely 
eliminated. For farms that own land, the reduction in land values will 
negatively effect the solvency position of those farms, and may reduce 
the profitability of those farms as well. Table 10 shows the changes in 
net farm income, rate of return on assets, and rate of return on equity 
as government payments are reduced. As government payments are reduced, 
net farm income is reduced by the same amount. Since larger farms 
receive larger payments, total income losses are greater for larger 
farms. On a percentage basis, however, smaller farms are more adversely 
affected.

 Table 10. Net Farm Income, Rate of Return on Assets, and Rate of Return
            on Equity for KFMA Farms by Farm Size, 1995-2004
------------------------------------------------------------------------
       Measure           Small        Medium       Large      Very Large
------------------------------------------------------------------------
Net Farm Income         - $20,467       $1,226      $37,579     $124,484
 (NFI)
NFI w/ Govt. Pmts       - $21,475     - $1,045      $33,502     $117,739
 Reduced by 10%
NFI w/o Govt. Pmts      - $30,549    - $21,480     - $3,186      $57,037
Rate of Return on         - 5.22%        3.22%        8.20%       12.31%
 Assets (ROA)
ROA w/ Govt. Pmts         - 5.70%        2.76%        7.75%       11.90%
 Reduced by 10%
ROA w/o Govt. Pmts       - 10.67%      - 2.02%        3.21%        7.90%
Rate of Return on        - 15.51%      - 1.00%        8.37%       17.63%
 Equity (ROE)
ROE w/ Govt. Pmts        - 17.13%      - 2.86%        7.33%       16.95%
 Reduced by 10%
ROE w/o Govt. Pmts       - 27.53%     - 13.01%      - 1.17%        8.66%
------------------------------------------------------------------------

    Because income levels differ dramatically between farm sizes, 
better measures of changes in profitability include the rate of return 
on assets (ROA) and equity (ROE). ROA and ROE were used instead of RRCM 
because they provide a better indication of how changes in government 
payments affect profitability in terms of a producer's investment and 
not a landlord's. According to the data shown in table 10, ROA 
decreases by less than 0.5 percentage points for all farm sizes if 
government payments are reduced by 10 percent. Declines in ROE range 
from 1.86 percentage points for medium farms to 0.68 percentage points 
for very large farms.
    If government payments are eliminated altogether, rate of return on 
assets decreases by over five percentage points for the two smallest 
farm sizes, and by 4.4 percentage points for very large farms. Rate of 
return on equity drops by approximately 12 percentage points for small 
and medium farms, but only by 9.5 and nine percentage points for large 
and very large farms, respectively. In spite of the declines, rate of 
return on assets and equity remains positive for very large farms.

 Table 11. Average Total Assets, Liabilities, and Equity for KFMA Farms
                         by Farm Size, 1995-2004
------------------------------------------------------------------------
         Measure             Small      Medium       Large    Very Large
------------------------------------------------------------------------
Total Assets                $359,808    $550,677    $907,746  $1,577,664
Total Assets w/ Govt.       $353,206    $542,006    $894,685  $1,557,077
 Pmts Reduced by 10%
Total Assets w/o Govt.      $293,182    $463,175    $775,944  $1,369,923
 Pmts
Total Liabilities            $75,448    $155,888    $282,464    $551,111
Equity (Net Worth)          $284,360    $394,790    $625,282  $1,026,553
Equity w/ Govt. Pmts        $277,758    $386,118    $612,220  $1,005,966
 Reduced by 10%
Equity w/o Govt. Pmts       $217,734    $307,287    $493,480    $818,812
------------------------------------------------------------------------

    Based on the values in table 11, average total assets fell 18.5%, 
15.9%, 14.5%, and 13.2% for small, medium, large, and very large farms, 
respectively. The difference in asset values is due to small farms 
having a greater portion of assets in land. Larger farms tend to rent a 
higher percentage of land versus owning, making long term assets such 
as land a smaller percentage of total assets than small farms. As 
liabilities remained constant, the average debt/asset ratio for each 
size of farm increased by about six percentage points, with small farms 
having the lowest ratio at 32.0%, and with very large farms having the 
highest ratio at 42.6%. Average declines in equity ranged from 23.4% 
for small farms to 20.2% for very large farms. Although the average 
financial position declined for KFMA farms when government payments 
were eliminated, the number of farms that become insolvent during the 
1995-2004 timeframe increased by only 2 percent (0.7% to 2.7%).
    While the preceding discussion simply illustrates the impact of 
government payments through mean values, it is also important to 
understand that there is a tremendous amount of variability between 
farms as well. For example, figure 3 shows the mean ROA without 
government payments by farm size. Looking exclusively at small farms, 
the average ROA without government payments was - 10.7%. However, at 
one standard deviation above and below the mean, ROA would be 2.8% and 
- 24.1%, respectively. This indicates that many, but not all farms will 
become unprofitable if government payments are eliminated.


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    There are many potential reasons why the loss of government 
payments may have different effects on farms in Kansas. First and 
foremost, since most government payments are targeted toward specific 
commodities, those farms that have historically produced those 
commodities will receive the bulk of farm program payments. Therefore, 
if farm programs are reduced or eliminated, those farms will likely be 
affected more than farms that do not produce those commodities. For 
example, figure 4 shows ROA and ROA without government payments for 
four types of farms in the KFMA data set. These farms include non-
irrigated crop, irrigated crop, cow herd, and beef backgrounding. As 
one would expect, ROA suffers larger declines for both non-irrigated 
and irrigated farms than cow herd or beef backgrounding operations. 
Irrigated farms suffer the largest decline in returns, and cow herd 
operations the smallest. Beef backgrounding operations are the only 
ones who earn a positive return.


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    A second reason for the variability of impact of farm program 
payments is that farms vary significantly in terms of their ability to 
consistently earn positive returns. It was demonstrated earlier that 
larger farms have shown the ability to produce at lower cost than their 
smaller counterparts. That ability has allowed larger farms to earn 
higher profits and be less dependent on government payments. In 
addition, some farms within a particular size class have demonstrated 
the ability to earn higher returns than comparably sized farms without 
the benefit of additional government payments.
    Finally, as previously mentioned farms in the data set may have 
experienced different conditions over the last 10 years, such as 
drought and highs and lows in cattle prices that have increased or 
decreased the amount of government payments they received relative to 
average and to other farms.
Discussion and Summary
    The fact that profitability varies so much between farms with and 
without government payments has some major implications for farms in 
Kansas and the forthcoming debate over the 2007 Farm Bill. In recent 
farm bill debates, support for farm subsidies has been broad and 
bipartisan. Recently, however, that support has splintered to some 
degree and become increasingly contentious as Federal budget pressures 
developed and advocacy groups have protested against farm program 
payments being inefficient and detrimental to poor, developing 
countries. As a result, proposals have been made to reduce farm program 
payments.
    This paper has shown that, over the last 10 years, farm program 
payments have been a significant factor in farm profitability. However, 
it has also shown that other factors, such as cost management and 
production have larger effects on profitability than government 
payments. Nevertheless, if government payments were reduced or 
eliminated, farm profitability would be diminished. Obviously, those 
farms that specialize in the production of farm program commodities 
would suffer larger losses than those who do not specialize in those 
commodities. In addition, larger farms would be able to absorb the loss 
of government payments better than small farms, and in many cases even 
remain profitable. On the other hand small farms were not profitable, 
on average, even with government payments. Because farm profitability 
varies significantly between farms, some difficult questions arise 
regarding future farm policy.
    For instance, since large farms are typically more profitable than 
small farms, and receive a smaller portion of gross income from 
government payments, it could be construed by some that payment 
limitations could be imposed on large farms with minimal effect on 
profitability. To do so, however, requires a means to impose those 
limits. In other words, should payment limitations be based on a strict 
ceiling of total payments, number of acres farmed, gross income, or 
some other measure? This leads to the issue of equity. The problem with 
using one of the above measures to define an ``equitable'' distribution 
of government payments is that one's particular definition of 
``equitable'' may not meet another's definition. This can already be 
seen in the reaction of various commodity groups to proposed stricter 
payment limitations. One commodity group's definition of an equitable 
distribution of payments does not agree with another's.
    Then there is the issue of the variability of profits and motives 
between similar farms (i.e., size and type). As a group, small farms 
have difficulty competing with large farms. But in terms of 
profitability, some can compare favorably with large farms. Other small 
farms are not profit oriented. They have other primary occupations, but 
enjoy and value the agricultural lifestyle. The remaining group of 
small farms faces challenges such as limited resources and production 
or management inefficiencies. (Large farms can face these challenges as 
well). Even if people would agree to target farm payments to small 
farms, the question exists as to whether those payments should be 
targeted to all three of those groups. These circumstances make forming 
farm policy difficult. That is why it is important to understand the 
structure of agricultural and understand how changes in policy may 
impact farms. When the process of understanding the relationship 
between government payments and farm profitability begins, often more 
questions arise then are answered. Consequently, this study is just one 
step in a broader effort to provide information to a complex issue.
References
    Banker, D.E. and J.M. MacDonald, Eds. (2005) Structural and 
Financial Characteristics of U.S. Farms: 2004 Family Farm Report. 
Agriculture Information Bulletin No. 797. Washington, D.C., USDA-ERS.
    Dumler, Troy J. Farm Size in Kansas: Is Bigger Better? 2002 Kansas 
State University Agricultural Lenders Conference. January 2002.
    Kastens, T. and K. Dhuyvetter. Government Program Payments and Non-
agricultural Returns Affect Land Values. www.agmanager.info. September 
2005.
    USDA-NASS. (2004) 2002 Census of Agriculture. Vol. 1, Part 16. 
Washington, D.C., USDA-NASS.
    USDA-ERS. (2004) Direct Government Payments by Program 1996-2003. 
Washington, D.C., USDA-ERS. http://www.ers.usda.gov/data/FarmIncome/
finfidmu.htm#payments.

    Mr. Etheridge. Dr. Miller.

 STATEMENT OF BILL MILLER, Ph.D., CATTLE PRODUCER, PRINCETON, 
    KS; ON BEHALF OF FRANKLIN COUNTY FARM BUREAU ASSOCIATION

    Dr. Miller. I wasn't quite sure about what to talk about, 
so I finally decided that maybe I could just sit here and 
complain for 5 minutes and see how it goes.
    Ag producers in Kansas face many challenges that affect 
their operation. Among those are ever increasing costs of fuel 
and fertilizer. When most other businesses are faced with 
increases in cost for production, those costs are passed on to 
the consumer. Farmers pay high prices for necessary inputs to 
grow food and fiber and usually have to sell their produce at 
whatever price is offered. They do not have the luxury of 
passing increased costs associated with production on to 
anyone. As a result, their operation is always operating 
between a rock and a hard place.
    Within the last year, farmers have had a significant 
increase in the price of grain that they sell, but when you 
consider the increase in production costs, the bottom line 
doesn't change much. When environmental conditions are such 
that production is high, then the supply and demand equation 
takes effect and market prices are low. And when environmental 
conditions are such that crops are not good, the price 
increases, but the problem with that is he doesn't have 
anything to sell.
    Most farmers operate a business that barely hangs on from 1 
year to the next and they exist in that manner from year in, 
year out, year after year. And when he or she gets too old to 
farm and decides to pass it on to the next generation, then the 
next generation starts out by trying to dig themselves out of a 
hole that was inherited when they inherited the farm.
    The lack of rural development results in young people 
growing up and moving away, never to return to the community 
which they grew up in, unless it's as a visitor. Agriculture is 
a key component of rural communities, but if rural communities 
are to survive, they must be strengthened. They need better 
access to education, health care and improved infrastructure. 
In western Kansas a man might bleed to death before he can get 
to a physician for medical help. In east Kansas the worst thing 
associated with the same injury might be the headache and 
boredom that his wife suffers while he lays around the house 5-
6 days recuperating.
    Farmers are among the most productive and most creative 
entrepreneurs in this country, but farming is a never-ending 
battle. It's a battle that you can fight for a while, but there 
comes a time when you get tired of fighting or you just can't 
afford to fight anymore.
    I admit that today the things that I've said have barely 
etched a mark when it comes to identifying challenges faced by 
agriculture in Kansas, but you've heard from others and you'll 
hear from more--more from those that follow.
    If Kansas agriculture is to remain viable and survive, then 
these issues must be addressed.
    In closing I must say that it is a privilege and an honor 
to be able to sit here and address such a distinguished group 
of people. I thank you for requesting my presence here today 
and I thank you for listening.
    [The prepared statement of Dr. Miller follows:]

 Prepared Statement of Bill Miller, Ph.D., Cattle Producer, Princeton, 
        KS; on Behalf of Franklin County Farm Bureau Association
    Agricultural producers in Kansas face many challenges that effect 
their operation. Among those are the ever increasing costs of fuel and 
fertilizer. When most other businesses are faced with increases in 
production costs, those costs are passed on to the consumer. Farmers 
pay high prices for necessary inputs to grow food and fiber and usually 
have to sell their produce at whatever price is offered. They do not 
have the luxury of passing increased costs associated with production 
on to the consumer. As a result, their operation is always between a 
rock and a hard place.
    Within the last year, farmers have had a significant increase in 
the price of grain that they sell but when you consider the increase in 
production costs, net income doesn't change very much. When 
environmental conditions are such that production is high, then the 
supply and demand equation takes effect and market prices are low. When 
environmental conditions are not good and production is low, then grain 
prices are high but the problem with that is that there isn't much to 
sell.
    Most farmers operate a business that barely hangs on from 1 year to 
the next and they exist in that manner year in and year out. And when 
he or she gets too old to farm and decides to pass the operation on to 
the next generation, then the next generation starts out by trying to 
dig their way out of a hole that was created when they inherited the 
farm.
    Farmers are among the most creative and most productive 
entrepreneurs in the country. But farming is a never-ending battle, 
it's a battle that you can fight for a while but there comes a time 
when you do get tired of fighting.
    I admit that today, I have barely etched a mark when it comes to 
identifying the challenges faced by agriculture producers in Kansas but 
you have already heard from others and you will hear more from those 
that follow.
    In closing, let me say that your being here today as 
Representatives of the Agriculture Subcommittee attests to your good 
will and your good intentions and for that, I thank you.

Bill Miller, Ph.D.

    Mr. Etheridge. Thank you. Mr. Rome.

  STATEMENT OF STEVE ROME, CROP FARMER; PRESIDENT, SOUTHWEST 
  KANSAS CORN GROWERS ASSOCIATION; BOARD MEMBER, KANSAS CORN 
                GROWERS ASSOCIATION, HUGOTON, KS

    Mr. Rome. Mr. Chairman and Members of the Committee, my 
name is Steve Rome and I'm honored and humbled by the 
opportunity to testify before you this morning. I'm also a bit 
puzzled as to why I deserved whatever, whether this is an honor 
or punishment, for being in front of this group. But, 
nevertheless, I appreciate the time that you have all spent to 
come to Kansas and to hear the situations that we deal with.
    I'm involved in an irrigated farming operation in southwest 
Kansas with two of my brothers and we're actually third 
generation citizens of the United States. So I've started out 
with saying that immigration is one of the issues that, I 
think, we have to somehow deal with. The labor force in western 
Kansas relies heavily on our neighbors to the west, not only 
Hispanic population, but the German Mennonites, and some type 
of a solution to allow those people to become citizens, I 
think, is important. I don't particularly, in my opinion, think 
a guest worker program is a solution. We need these folks for a 
year-round job. We do have jobs for them. They're hard workers. 
And so I challenge Congress to look for solutions there. That's 
a real need. We've had an ad in the paper for 2 weeks for two 
employees and we have not had an answer. It's not because we 
don't pay. We feel like we pay decent wages, benefits, paid 
vacation, so on, so forth. So that's one of the issues that, I 
think, we struggle with.
    Our operation we took over from the folks in 1982 and it's 
grown about 10 fold in that time. And I've made the joke that 
we've figured out at least part of Sam Walton's business plan: 
We've learned how to sell more for less. We don't always know 
how to influence the people we buy products for on the inputs 
and we don't know how to pass along the costs that are part of 
our production and that's frustrating.
    I was talking to a neighbor the other day that had some 
welding that was going on on some farm equipment a mile away 
from a machine shop and he had a $10 surcharge that he added 
onto his bill for a mile drive. No doubt that fuel charge is 
part of that business's expense and he needs a way to recoup 
that. We are no different. We have reduced our fuel usage in 
our operation tremendously through the use of no-till, strip-
till, a lot of less tillage. We, in our part of the world, have 
served on lots of K-State committees as my bio says and I 
appreciate the purple. I didn't go to school there, but it's a 
soothing color.
    We see as much variance from the western side of Kansas to 
the eastern side of Kansas as we do from the eastern side of 
Kansas to the East Coast. So there's a lot of variability in 
our state on rainfall and soil types and the challenges. When I 
looked at the letter that I received inviting me to the 
hearing, it said describe the challenges facing Kansas. And I 
thought about that a little bit and tried to figure out exactly 
what to say; and I decided that if you didn't live close to a 
town that was hit by a tornado that spread the entire town 
throughout all your fields, or you weren't in an area where all 
your wheat was frozen and it was smelling like sewage, or it 
was hailed out, or the fields were so wet that you couldn't get 
a planter across it, times are relatively good.
    In our part of the world we had a little bit of moisture 
this winter. Some of it was in ice and it did a lot of damage 
to our trees. REA poles: we spent a lot of time without 
electricity this winter. Fortunately we're back up and running 
and so we've decided energy and the ability to flip on a light 
when you need it is important, although we've learned how to 
use candles and other things.
    The thing that I struggle with when we look at this is most 
of the time when you read a farm magazine article it talks 
about the price of production or, excuse me, it talks about not 
being afraid to sell at a profit. That's an interesting 
statement for those of us who have spent many winters--which 
farmers supposedly aren't working during the winter--but spent 
many winters buying feed or trying to identify what is a profit 
and how do you identify that.
    In our part of the world that's always a two part equation, 
and in most articles it's talked about as just being a price. 
The costs very seldom run into that. We're always, even though 
we see some pretty decent prices, and we see an opportunity for 
this year to be profitable.
    I'm a little bit concerned about what the inputs are going 
to do and I would say that the people that are in the livestock 
industry would maybe not agree with me on how good of a benefit 
ethanol is. To us it's one of the bright spots of the economy 
and I hope our government continues to see the value of that 
into the future. It's a--we talked about cellulosic and I think 
Stevens County is one of the two counties that's in the final 
running for a cellulosic plant, but yet I have heard no 
presentations on economics of switch grass production. I've 
also not heard anything from NRCS as to how much they're going 
to scream when we remove all the residue that we've spent lots 
of years trying to accumulate on our soils. So there are some 
questions I have about that, but I think it makes lots of sense 
to continue that process.
    Anyway, there's lots of stuff to cover today and I 
appreciate the opportunity to be here and look forward to any 
questions that you might have later on. Thank you.
    [The prepared statement of Mr. Rome follows:]

  Prepared Statement of Steve Rome, Crop Farmer; President, Southwest
   Kansas Corn Growers Association; Board Member, Kansas Corn Growers
                        Association, Hugoton, KS
    Mr. Chairman and Members of the Committee: My name is Steve Rome 
and I am honored by the opportunity to testify before you this morning. 
I am involved in an irrigated farming operation with my two brothers in 
southwest Kansas near Hugoton. We are third generation United States 
citizens. I think our family has an appreciation for the immigration 
situation which is very important to the economy of western Kansas. My 
grandfather immigrated to the United States from Germany through Russia 
in the late 1800's. My father had to learn English when he started 
school, and as Dad would tell us, if the nuns caught you speaking 
German, you would be reminded to speak English by a ruler on your 
knuckles.
    When we took over the farm in 1982, we farmed about 1,200 acres. 
Today we farm approximately 12,000 acres with about 75% being irrigated 
by center pivots. Some would say this is a large business and I suppose 
it is, and I'm not sure if the risk is always worth the return. 
Nevertheless, this is a family farm. I hear so many people say we need 
to save the family farm but I never hear anyone say we need to save the 
family grocer, hardware store, pharmacy, lumber yard etc. We have 
figured out the ``how to sell more for less'' part of Sam Walton's 
business plan, but we are unable to figure out to exert the influence 
on our suppliers or pass on our increased cost to our customers. 
Without farm subsidies and an understanding lending institution our 
farm would probably not exist today and according to our insurance 
agent we have one of the highest APHs of all of his customers. Most of 
the writers whose articles I read in farm publications always talk 
about not being afraid to sell at a profit. I wonder how they possibly 
know what that is when they very seldom discuss the cost of production 
in the articles only the price of the commodity. Last year, I would 
have bet right up until we put the combine in the field that we had an 
average to above average crop. I was fooled along with our crop 
consultant, county agent and the rest of the industries that try to 
guess how good of a job of production we did for the year. Our yields 
were off 20% which nobody anticipated. Success or profit is always a 
two part equation ``price  yield''. Unfortunately this type of loss 
usually puts us at a level with crop insurance where all we lose is the 
profit! I keep telling my brothers we need to put a sign along the 
highway that reads ``We are giving you the opportunity to second guess 
us at least 1 more year.''
    We use crop insurance to help manage our risk and give us the 
opportunity to pre-market our planned production. With crops like wheat 
that we have not been able to maintain yields on, the insurance program 
becomes less effective in risk management. This is because we have 
suffered several years with below average yields caused by drought, 
diseases and freeze damage. It would seem that crop insurance could be 
designed to insure anticipated revenue, and not have coverage to cover 
less and cost more when we have a crop loss.
    I serve on the Kansas Corn Growers Board and have heard Ken 
McCauley explain NCGA's plan for some type of a revenue plan that would 
limit or do away with direct payments and create something that would 
be a safety net when yield or prices were low. I have not studied this 
enough to have an opinion whether this is a good solution. We do think 
the programs could be made simpler and easier to explain to an out of 
state landowner. Surely there is a better word than counter cyclical. 
We have a landowner that was a college professor and then a consulting 
geologist. He is a very intelligent and detailed person but he drives 
the poor ladies in our local FSA office insane trying to figure out how 
his payments were determined and if they are correct.
    Agriculture is the life blood of western Kansas. Our farm is 
located on top of two finite and depleting resources, the Ogallala 
Aquifer and the Hugoton Natural Gas Field. The recent increase in grain 
prices has farmers apprehensively excited about the future of our 
industry. We have not even completed one growing season with the 
increased grain prices we have seen from the growth in the ethanol 
industry and we are already concerned about what the higher prices will 
do to our long time customers in the livestock industry.
    I have served on several committees to discuss how to maintain the 
water supply that has made our economy what it is. We killed lots of 
trees creating reports but have done little to stop the decline. Most 
farmers have implemented practices (strip till, no-till, raising 
cotton, center pivots) to make their business more efficient and 
hopefully save water, but the reality in my mind is that it is no 
different than the natural gas industry. They are both finite resources 
but one we are attempting to remove as rapidly and completely as 
possible but with water our goal is to maintain the resource 
infinitely. For those of us who are investing in production 
agriculture, it almost seems to be a hypocrisy. It is difficult to make 
long term investments with this uncertainty and it varies from state to 
state which also makes it difficult to attract new industry to our area 
when they see the differences in water law. I have told the people on 
the committees that it is my goal to run out of water the day before 
the second coming of Christ. Even though I say that with tongue in 
cheek, I believe anything beyond drinking water should be treated as a 
resource not unlike natural gas, oil etc. I serve on our county 
economic development board and we think Stevens County is one of the 
final two choices for a cellulosic ethanol plant but I have not heard 
one presentation on the economics of switch grass production. I also 
have not heard from NRCS on what concerns they might have about the 
removal of the entire above ground residue as it would apply to 
conservation plans.
    The letter I received inviting me to testify asked about the 
challenges facing Kansas farmers. If you are a grain producer and don't 
happen to live close to one of the communities that was hit with a 
tornado that spread the town through out your fields, or your wheat was 
not frozen earlier this spring, or your fields are not so wet that you 
can't get a planter across them, then this a better year compared to 
the last several. We have had a little moisture and the grain prices 
look decent. If you are a livestock producer and had to put up with all 
the snow and ice this winter and are now looking at record high grain 
prices you might not think times look so good.
    In closing I would like to say that with current economics, most 
farmers have less concern about a subsidy program than they have in the 
last few years. The main concern most of us have is with the investment 
it takes to run a farming operation, changes in policy can have a 
devastating effect on the profitability our industry. Most of us would 
be more than happy to get our profit from the marketplace but with the 
risk of inputs, rent, and land costs increasing, most of us are still 
skeptical that can be done. I would like to have some of the magazine 
and newspaper writers tells us exactly what it is to compete in a fair 
world market. I'm not sure that exists.
    I have heard many K-State economists say ``on average we drive the 
profits on most businesses to zero.'' It appears it will continue to be 
more difficult to be above average in the future. I still remember the 
comment our banker made when we brought in one of our first farm 
payment checks. He said ``I see you received your welfare check.'' I 
said I thought we worked way too hard for this to be called welfare. It 
appeared to me those payments were as much of a benefit to his business 
as they were to mine. I read many articles in the newspapers that make 
me think the non-farming just consider this a form of welfare. We think 
the subsidy program should not be based on what a person's income is, 
but should be a tool to help make sure we have a viable food production 
system in this country.
    In my opinion, we as a country cannot afford to have a national 
policy that relies on other countries for our food or energy supplies.
    In reflecting back on the past 25 years, I sometimes wonder if we 
would have made the same decision to get involved in this business. We 
are against payment limitations. It sometimes appears my brothers and I 
are being penalized by trying to run an efficient operation. By running 
our business as a partnership, we can spread the cost of expensive 
equipment over more acres. But we would not make the list of operations 
that receive a large amount of government payments if we each had our 
own operation. I am not sure it is wise or good business to have part 
of the farm program that helps ``beginning farmers'' get into a 
business that is so capital intensive and has such huge risks involved 
with it. With most of our retirement tied up in the value of land, and 
the State of Kansas having so much influence on that value with where 
they try to take water law, it makes for many sleepless nights.
    I thank you for the opportunity to address you today.

    Mr. Etheridge. Mr. Starck.

  STATEMENT OF BRIAN STARCK, CORN, SOYBEAN, AND WHEAT FARMER; 
 SWINE PRODUCER, FAIRBURY, NE; ON BEHALF OF JEFFERSON COUNTY, 
                      NEBRASKA FARM BUREAU

    Mr. Starck. Good morning. My name is Brian Starck, a farmer 
in Jefferson County in the southeast part of Nebraska. My 
family and I own and operate a corn, soybean and wheat farm 
which includes a 100 sow farrow to finish swine operation.
    Mr. Chairman and Members of the Committee, I want to thank 
you for holding this field hearing on the 2007 Farm Bill and 
for taking time to listen to those who have the most at stake 
in this debate--our nation's farmers and ranchers.
    The landscape that my family farm faces has changed 
considerably since the enactment of the 2002 Farm Bill. 
Unpredictable weather conditions, market opportunities 
involving the development of the ethanol industry, 
uncertainties involved with international trade and 
significantly higher input costs are creating many challenges 
for my operation.
    While we are experiencing some great opportunities in the 
corn and soybean market at the present time, now is no time to 
abandon the basics of the safety net created in the 2002 Farm 
Bill. What should be done in the 2007 Farm Bill is to make some 
modifications to the existing safety net to help farmers like 
me deal with the growing risks inherent to agriculture.
    We in agriculture are unique in many ways. We are very 
vulnerable to weather related crop disasters each and every 
year, which constantly puts my production levels at risk. In 
2001 we experienced dryland corn yields of 10 to 30 bushels per 
acre, and again in 2003 we experienced similar yields.
    We are price takers when we sell our commodities. To 
develop a farm policy on the notion that crop prices will 
remain high for a long time would be a mistake. Farm commodity 
markets are no different than other markets in that they will 
cycle and there will be both good and bad years to come. We 
have to keep a safety net in place to deal with the risk of 
lower prices.
    When it comes to the input side, I am also a price taker. 
When I purchase fertilizer, fuel and other inputs vital to my 
operation, some of these costs have almost doubled in the last 
3 to 4 years which makes my operation even more vulnerable to 
production and price risks that I face.
    Therefore, I support a safety net structure that 
incorporates direct payments, counter-cyclical support and 
LDP's; however, I believe that consideration should be given to 
modify the counter-cyclical program to have payments triggered 
by a shortfall in crop revenue rather than a trigger based 
solely on price.
    I have faced a couple years of drought during the last 5 
years and it seemed that the years I needed the most assistance 
from a safety net, I received the least help from current 
safety net structure because you had to grow the crop in order 
to receive assistance. In those dry years the direct payments 
were very beneficial because they provided some cash assistance 
at a time when there was a short crop to sell.
    I also believe that crop insurance continues to play a 
larger and larger role in providing a safety net for my 
individual risk in agriculture. I usually participate in a 70 
to 75 percent level of CRC coverage policy, and though I hope 
to never receive the guarantee, I know it is there to recoup 
most inputs at a near break-even level.
    It is my opinion that future farm policy should strive for 
more improvement in our current crop insurance program while 
taking the uncertainties out of annual disaster bills that seem 
to come up every year in Congress.
    As a farmer from a state that relies on a great deal of 
farm exports, I think it is imperative that the next farm bill 
be compliant with current WTO rules. WTO violations could have 
a huge negative impact on many sectors in agriculture--
particularly the livestock industry. By the same token, the 
2007 Farm Bill should not be written to comply with what 
someone assumes will be the outcome of the current WTO 
negotiations taking place.
    Many producers in Jefferson County are participants in the 
Conservation Security Program. I support the CSP program and I 
think we should look for ways for more funding to provide room 
for steady and efficient expansion of the program. The CRP 
program has, in some cases, turned out to have some negative 
economic factors in rural counties. The rent paid on CRP acres 
used to stay in the local economy, but with the rise in outdoor 
enthusiasm some urban landowners have purchased land for 
hunting and the majority of the rent paid is being exported to 
Lincoln, Omaha or Kansas City, and only the property tax money 
is staying in our local economy.
    In terms of bio-fuel development, I believe it is 
imperative that Congress prioritize research on modifications 
of dried distiller grains and other byproducts to expand their 
use, especially in non-ruminant animals. Projections are by the 
end of 2009 we will process the equivalent of 65 percent of 
total production of corn in Nebraska to ethanol and we will 
increase the production of DDG's threefold.
    In order to take advantage of this exciting phenomenon in 
Nebraska of corn to ethanol to DDG's to livestock, we must have 
the research to improve ways distiller grains can be used for 
cow/calf operations, non-ruminant animals, and to enhance the 
consistency of the DDG's to increase their levels in cattle 
rations.
    Finally, one last issue is the 1031 tax-free exchanges. 
This has forced land values in my area to a point where I and 
other young producers are unable to compete in purchasing land 
for further expansion without seriously diving into debt with 
little chance of success in servicing that debt.
    Mr. Chairman and Members of the Committee, thank you for 
the opportunity to share our thoughts with you and I look 
forward to any questions you may have.
    [The prepared statement of Mr. Starck follows:]

 Prepared Statement Of Brian Starck, Corn, Soybean, and Wheat Farmer; 
 Swine Producer, Fairbury, NE; on Behalf of Jefferson County, Nebraska 
                              Farm Bureau
    Good morning. My name is Brian Starck, a farmer in Jefferson County 
in the southeast part of Nebraska. My family and I own and operate a 
corn, soybean and wheat farm which includes a 100 sow farrow to finish 
swine operation.
    Mr. Chairman and Members of the Committee, I want to thank you for 
holding this field hearing on the 2007 Farm Bill and for taking time to 
listen to those who have the most at stake in this debate--our nation's 
farmers and ranchers.
    The landscape that my family farm faces has changed considerably 
since the enactment of the 2002 Farm Bill. Unpredictable weather 
conditions, marketing opportunities involving the development of the 
ethanol industry, uncertainties involved with international trade and 
significantly higher input costs are creating many challenges for my 
operation.
    While we are experiencing some great opportunities in the corn and 
soybean markets at the present time, now is no time to abandon the 
basics of the safety net created in the 2002 Farm Bill. What should be 
done in the 2007 Farm Bill is to make some modifications to the 
existing safety net to help farmers like me deal with the growing risks 
inherent to agriculture.
    We in agriculture are unique in many ways. We are very vulnerable 
to weather-related crop disasters each and every year which constantly 
puts my production levels at risk. In 2001 we experienced dryland corn 
yield of 10 to 30 bu/acre and again in 2003 we experienced similar 
yields.
    We are price takers when we sell our commodities. To develop a farm 
policy on the notion that crop prices will remain high for a long-time 
would be a mistake. Farm commodity markets are no different than other 
markets in that they will cycle and there will be both good and bad 
years to come. We have to keep a safety net in place to deal with the 
risk of lower prices.
    When it comes to the input side, I am also a price taker when I 
purchase fertilizer, fuel and other inputs vital to my operation. Some 
of these costs have almost doubled in the last 3 or 4 years which makes 
my operation even more vulnerable to production and price risks I face.
    Therefore, I support a safety net structure that incorporates 
direct payments, counter-cyclical support and loan deficiency payments. 
However, I believe that consideration should be given to modify the 
counter-cyclical program to have payments triggered by a shortfall in 
crop revenue rather than a trigger based solely on price.
    I have faced a couple years of drought during the last 5 years and 
it seemed that the years that I needed the most assistance from a 
safety net, I received the least help from current safety net structure 
because you had to grow the crop in order to receive assistance. In 
those dry years, the direct payments were very beneficial because they 
provided some cash assistance at a time when there was a short crop to 
sell.
    I also believe that crop insurance continues to play a larger and 
larger role in providing a safety net for my individual risk in 
agriculture. I usually participate in a 70% or 75% level Crop Revenue 
Coverage policy and though I hope to never use the guarantee I know it 
is there to recoup most inputs at a near break-even level.
    It is my opinion that future farm policy should strive for more 
improvements in our current crop insurance programs while taking the 
uncertainties out of annual disaster bills that seem to come up every 
year in Congress.
    As a farmer from a state that relies a great deal on farm exports, 
I think it is imperative that the next farm bill be compliant with 
current WTO rules. WTO violations could have huge, negative impacts on 
many sectors in agriculture--particularly the livestock industry. By 
the same token, the 2007 Farm Bill should not be written to comply with 
what someone assumes will be the ``outcome'' of the current WTO 
negotiations taking place.
    Many producers in Jefferson County are participants in the 
Conservation Security Program. I support the CSP program and I think we 
should look for ways for more funding to provide room for steady and 
efficient expansion of the program. The CRP program has in some cases 
turned out to have some negative economic factors in rural counties. 
The rent paid on CRP acres use to stay in the local economy but with 
the rise in outdoor enthusiasm some urban landowners have purchased 
land for hunting and the majority of the rent paid is being exported to 
Lincoln, Omaha or Kansas City and only the property tax money is 
staying in the local economy.
    In terms of biofuel development, I believe it is imperative that 
Congress prioritize research on modifications of Dried Distiller Grains 
(DDGs) and other byproducts to expand their use, especially in non-
ruminant animals. Projections are by the end of 2009, we will process 
the equivalent of 65 percent of total production of corn in Nebraska to 
ethanol and we will increase the production of DDGs threefold.
    In order to take advantage of this exciting phenomenon in Nebraska 
of corn to ethanol to DDGs to livestock, we must have more research to 
improve ways distiller grains can be used for cow/calf operations, non-
ruminant animals, and to enhance the consistency of the DDGs to 
increase their levels in cattle rations.
    Finally, I like to mention some of the conditions that I have had 
to face because of the unintended consequences of the current and past 
farm bill and how that impacts the next generation of farmers. Clearly, 
government support has had an impact on land costs and cash rents which 
is often cited as a factor limiting opportunities for young farmers 
entering agriculture. It is my opinion that the payment limitation is 
too high and the big farmer that hits the limitation just starts 
another entity and then can go and offer in some cases $20 to $30 an 
acre more in cash rent than I or another small younger producer can 
compete with.
    Another policy issue affecting land values and cash rents relates 
to the 1031 tax-free exchanges. This has forced land values to the 
point were I and other young producers are unable to compete in 
purchasing land for further expansion without seriously diving into 
debt with little chance of success in servicing that debt.
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to share our thoughts with you and I look forward to any 
questions you may have.

    Mr. Etheridge. Thank you. Let me thank each of the 
witnesses and now we'll recognize each Member of Congress for 5 
minutes of questioning. And I will begin by yielding myself 5 
minutes.
    Mr. Dumler, I want to follow-up on your comments regarding 
higher crop prices and beef cattle prices. The topic of food 
versus fuel has been an underlying theme as we have moved 
forward toward this next farm bill. We've heard it here, but we 
also heard it in other places and many of the witnesses today 
have touched on the grain and livestock issues and many of you 
in this audience today probably have both.
    So my question is this: Can you give us a snapshot of 
producers here in Kansas? How common is it for a farmer here to 
have large grain and cattle production together? And for those 
producing both, is the rise in crop prices helping them make up 
for the increased cost in their livestock production?
    Mr. Dumler. I'd say a very high portion of Kansas producers 
have both grain and livestock in their operations.
    For example, the increase in production costs has had an 
impact on livestock producers in 2006 already. When you look at 
net farm income from our Farm Management Association, it was 
down in 2006 from 2005 and most of that was from livestock 
producers. Cash grain producers actually had--were either equal 
or had higher net farm income in 2006. So it does have an 
impact and it's impacting livestock producers right now as far 
as the increase in grain prices.
    Mr. Etheridge. So you're saying if you have both, though, 
you don't pick it up in the cattle production because the 
actual cost of the grain inputs are going to negate----
    Mr. Dumler. Potentially, yes.
    Mr. Etheridge. Your testimony mentioned one problem that 
we've been hearing about; that is the high cost of land values.
    Mr. Dumler. Yes.
    Mr. Etheridge. As you stated, farm program payments are 
often cited as one of those sources of rising land values. I 
have two questions on that because we've sort of got a three-
legged stool that we talk about in the farm bill: A direct 
payment, marketing loan programs and counter-cyclical payments. 
Which of these has the greatest risk of seeing its benefit 
captured in the land values? And Second, before you answer 
that, let me give you a hypothetical: If this Subcommittee had 
additional resources to put in place which we don't right now, 
but if we did, if we did put it in the programs and we wanted 
to make sure that these dollars got to the farmer rather than 
to the landowner, which are separate in some cases, which 
program would be the best one to add those additional resources 
to.
    Mr. Dumler. I would argue first that all three programs--
direct payments, counter-cyclical payment and marketing loan 
will get capitalized into land values. The direct payments will 
be capitalized probably faster. It's more transparent 
certainly. If the landowner is cash renting land, they may just 
increase the amount of the cash rent that they're asking by 
that much that the farmer's receiving.
    Mr. Etheridge. So your basic premise is that government 
payments add to the cost of land values.
    Mr. Dumler. Yes. But certainly the counter-cyclical payment 
and the marketing loan payment will get capitalized as well 
because again the cash rents and, in turn, land values are a 
function of income that you can earn off that land and each one 
of those programs increases that income. So they all will get 
capitalized into land values.
    Mr. Etheridge. Or in rent values.
    Mr. Dumler. In rent values, yes.
    Mr. Etheridge. Either or.
    Mr. Dumler. Yes, sir.
    Mr. Etheridge. Thank you. Mr. Moran, 5 minutes.
    Mr. Moran. Chairman, thank you very much. One of the 
disadvantages of no longer being Chairman, and there are many, 
is that I'm now held to this 5 minute time limit.
    Mr. Etheridge. But I didn't take all mine, Jerry.
    Mr. Moran. Thank you very much. Let me first acknowledge a 
number of folks in the audience that need to be recognized. Not 
only do we have the dean of K-State School of Agriculture, Fred 
Cholick here, but we have our host, the dean, Dean Kuhlman of 
K-State Salina. And so we appreciate very much the hospitality 
you've extended to us.
    For my colleagues from out of state, we're on the K-State 
Salina campus. K-State is in Manhattan, but this school here is 
generally devoted toward aviation. We have a very strong school 
of agriculture at Kansas State University.
    We also have with us Bill Fuller, who is the State Director 
of FSA. In the row behind him is Harold Klege who is the State 
Conservationist at NRCS and Adrian Polansky, our State 
Secretary of Agriculture, is also present. Plus, two of our 
leaders in the Kansas Legislature, Mark Taddiken, the state 
Senator who chairs the Senate Agriculture Committee and John 
Faber, who chairs the House Agriculture Committee. So we are 
surrounded by dignitaries. I tell you that mostly so that you 
can take your complaints to those folks.
    And then let me just speak briefly before I ask a couple 
questions. One, I think that folks need to know what a 
difficult circumstance this Subcommittee faces in regard to the 
new farm bill. I think it would be very difficult to draft a 
farm bill that provides the safety net that the current farm 
bill provides. The baseline budget that the House passed and 
Senate passed budget allow the House Agriculture and Senate 
Agriculture Committees to use in developing the farm bill, if 
you take the commodity title that we're responsible for on this 
Subcommittee, it's 43 percent less money than the 2002 Farm 
Bill. So when my Kansas constituents come to me and ask for a 
greater direct payment, higher loan rates, the reality is that 
we are asked to draft a farm bill, the commodity title, with 
nearly half the amount of money that was available in 2002.
    Now the budget provides a $20 billion reserve fund which 
perhaps is something that we're going to be able to utilize, 
but I remain very skeptical. Currently it's required that we 
either raise taxes or cut other spending to take money out of 
that reserve fund. So in many ways it looks like we're able to 
do more than, I think, ultimately we'll be able to do.
    And in particular, the direct payment is under attack in 
Washington. The Senate Chairman of the Agriculture Committee 
has indicated that he very much wants the direct payment to be 
used to fund CSP. In the House our Chairman has indicated that 
this is an opportunity for us to fund a permanent disaster 
program: to take money out of the direct payment and use it for 
permanent disaster and to rebalance loan rates.
    And so one of the topics that I would like to understand 
from the hearing today is how important the direct payment is 
as a component of this three-legged safety net that we created 
in the 2002 Farm Bill.
    And so let me ask particularly, Mr. Starck, in this case, 
you talked about those three payments and you had some pretty 
specific reasons why that direct payment was important to you 
as it would be to Kansas farmers.
    Mr. Starck. For myself the direct payment is very 
beneficial in getting a start on the next year for your yearly 
inputs. You know, the counter-cyclical, you don't know what 
it's going to be. It's nothing you can bank on. The direct 
payment, though, is very beneficial. The LDP, the problem with 
the LDP, as I stated, is you need to have the crop in order to 
collect that. If you don't produce anything, the LDP does you 
no good if there's an LDP there. But, yes, the direct payment 
to me is very beneficial.
    Mr. Moran. Professor Dumler, the direct payment and its WTO 
implications as compared to loan payments, anything that you 
would care to--what payments are least market distorted.
    Mr. Dumler. Direct payment is the least market distorting, 
as you well know. And we thought this was a WTO green box 
program meaning it has minimal market distortion, whereas, the 
counter-cyclical program and the commodity loan program each 
are amber box programs meaning that they have significant 
market distortion. So from the aspect of trade distortion, the 
direct payment has the minimum amount of those three.
    Mr. Moran. I appreciate the way Mr. Starck phrased it which 
is we ought not try to figure out how to comply with 
negotiations that are ongoing, but it is important for the next 
farm bill, as best we know how, to comply with WTO as it is 
today. I never thought we should extend the current farm bill 
while we figured out what WTO was going to do and turn our farm 
programs over to 140 negotiators in Geneva, but we do not want 
the uncertainty that comes with a commodity program that's 
subject to attack, constant attack at WTO.
    And using the Chairman's extra time, Mr. Rome, you, I 
think, mentioned in your testimony, but I don't think you said 
this vocally, payment limitations. It caught my attention 
because, as I understand it, there are three brothers farming 
in your farming operation. Payment limitations is a significant 
topic of conversation in Washington. Trying to figure out how 
do we best direct the amount of money that we can that 
increases the likelihood that farmers survive and that there's 
rural development, and communities are alive and well. How 
would a change in payment limitations affect your farming 
operation?
    Mr. Rome. We've had to structure our operation differently 
as we've grown and it appears to be a deterrent for growth in 
that industry or in this industry. And so, I guess, and I 
mention in the final pages of my written testimony that the 
first farm check I brought in to our banker when we first 
started, they referred to it as a welfare check. And I told him 
that I thought we worked way too hard for this to be called 
welfare, even though I knew him well and he was kidding and so 
forth.
    But the reality is that the cost of production is important 
to a large farm, as well as a small farm, and the large farm 
just like the way we talk about family farms and I mention in 
there, we're saving the family farm. We don't talk about family 
pharmacist, the family druggist, the family grocer, so on, so 
forth.
    And the reality is that to be efficient you have to cover 
more territory and the equipment to do it is expensive. So our 
business is a lot more efficient with the three of us tied 
together, but without structuring our business and subjecting 
ourselves to--don't remember the group that posts our numbers 
on the Internet as for the amount we--the environmental working 
group. You can be clever on how you structure things and hide 
that, but the reality is that just because you're larger 
doesn't necessarily mean those costs of production are any 
less. So it shouldn't be a welfare payment in my opinion. It 
should be something that ensures that we have an economy, an ag 
business that ensures food and potentially energy now with 
ethanol for a long time and we're not relying on other 
countries for that. So I think it's something that our farm 
businesses are growing.
    Mr. Moran. Thank you very much.
    Mr. Etheridge. Thank you. Mrs. Boyda.
    Mrs. Boyda. Thank you, Mr. Chairman. One of the 
difficulties that I have to deal with is I have to go after 
Jerry Moran too often. It's just difficult, Jerry. You don't 
make it easy on me.
    My question was pretty much the same, I think, as we've all 
been trying to get at too. There are three payments that are 
trying to be balanced and clearly we know that there's going to 
be less money in the pot right now because it's an equation 
that was set up. This is not an intentional thing that Congress 
is doing. It's just the way the formula is working right now.
    So among those three and, I think, what you were trying to 
do, Mr. Chairman, was to say if we had more money how would you 
spend it.
    So if I could go at the same question that, I think, each 
one of us is going at, and I would ask each one of you: Are we 
saying direct payments? How do those three work and if you were 
writing the farm bill, Mr. Dumler, how would you balance those 
three? How would you do that?
    Mr. Dumler. As an economist we like the idea of less market 
distortion. So from that standpoint the direct payment is 
favored.
    Mrs. Boyda. And who's going to get hurt by that? If we did 
it that way, who in Kansas will be hurt by that.
    Mr. Dumler. If we went to more direct payments.
    Mrs. Boyda. Yes. If we balance those three a little bit, 
but then we used more direct payments, who is going to get hurt 
by that? The corn growers, the soybean producers? Wheat? I know 
wheat--God bless the wheat growers. They understand democracy, 
the context for it.
    Mr. Dumler. If we think prices are going to remain high 
over the next few years, which the likelihood is they are, it's 
no guarantee that they will, but they are, then no groups are 
really going to get hurt that much if we maintain or enhance 
the direct payments. Nationwide probably like cotton, for 
example, would be the group that would get hurt most if we move 
money from other programs to specifically the direct payments.
    Mrs. Boyda. And as we all know, the Agriculture Committee 
tends not to be so bipartisan, but it does tend to be very 
regional.
    Mr. Dumler. Right. But I don't see groups here in Kansas, 
one commodity versus the other being hurt that much by 
potentially changing some of those programs around.
    Mrs. Boyda. Dr. Miller, I had asked a couple of cattle 
producers, I know we're talking--this is the commodity chair, 
but the fact is we have one hearing. We're not going to have 
another hearing. And certainly talking about cattle production 
and livestock production I just--we wanted to make sure that 
those issues were being heard as well.
    So could you talk to me, Dr. Miller, about just how you 
market your livestock and do you think you have access to 
markets? You know what we were talking about.
    Mr. Starck used the words price takers or price taker on 
both ends of the deal; you take whatever price is out there. 
How do you feel about competition, your access to markets?
    Dr. Miller. Where we live we don't have a problem with 
access to markets because we're within 10 or 15 minutes of two 
or three auction houses.
    Mrs. Boyda. So you feel you can get a pretty good price for 
your cattle on a given day. It's a competitive marketplace 
that's running.
    Dr. Miller. It's a competitive marketplace and it seems to 
depend on which day you take them there, you know. And I guess 
it does, you know, what are they looking for, who's there and 
what are they looking for today. And you don't know that until 
you get there and you're sitting there and they start bidding 
and then you know what they're looking for today.
    But in the last, I would say, year or year and a half, 
cattle prices have been very good; extremely good. And like it 
was alluded to earlier about the ethanol thing and livestock 
feed. They kind of clash. And we do feel that a lot now when we 
call the co-op and tell them to come out and fill the wheat 
feeders. It's not like it used to be at all. And it's due to 
the ethanol plant down at Garnett. So if we can get rid of it 
we'll----
    Mrs. Boyda. The press didn't hear that. Thank you very 
much. I'm going to take a little bit more of the Chairman's 
time, too, that Jerry didn't take or maybe Jerry did. But from 
your standpoint what's the one thing that we can do to help the 
young farmers? If we could write one piece into the farm bill 
what would that be?
    Mr. Starck. Give them a farm. That is the toughest thing is 
in order to be--I'm 35 and I started when I was a freshman in 
high school with 80 acres and my dad helped me get it set up.
    Mrs. Boyda. Good for you.
    Mr. Starck. And I think in today's climate, I have a six-
year-old and it's going to be tougher to get him into it than 
it was for my dad, I think. But one piece that would be a loan 
towards young producers, and how you define a young producer I 
don't know. I'd like to consider myself young, but I've been 
doing this for 17 years too so----
    Mrs. Boyda. You're young.
    Mr. Starck. Thank you. But a loan that would encourage a 
retiree to sell that property at a reduced rate to a young 
producer and have tax benefits for that retiree to not have to 
take the ultimate top price of the market.
    Granted that's not fair to the guy that can be competitive 
and bid the higher price, but to have that advantage for the 
young guy, he's going to need that or else we're all going to 
be pushing 40, 50, 60 and there's no one at 20 going to be 
coming back to take over.
    Mrs. Boyda. In the last 3 years I haven't met a farmer yet 
who doesn't tear up when talking about the next generation. 
True story, not one. Thank you.
    Mr. Etheridge. Thank you. All right. The gentleman from 
Iowa, Mr. King.
    Mr. King. Thank you, Mr. Chairman. I just do want to say 
that, Mr. Starck, you're going to be delighted at how great you 
feel when you're jumping out of bed when you're pushing 60.
    But in your testimony all of you impart so many questions 
and I appreciate all of it, all of us do.
    I'd like to turn first to Mr. Dumler and your discussion 
about all the farm program payments being capitalized and land 
prices, and I don't know if it was intentional, you said prices 
instead of values. But I notice as I look through your 
testimony I didn't pick out any chart in there that showed what 
had been the price of land value prices from 2002 through 2006 
as your comparison for the income portion of this. Can you give 
us some sense of what that trend has been producer to producer 
sales rather than producer to hunter sales or city investment 
sales?
    Mr. Dumler. I mean, land values, in general, have been 
trending up. And the tough thing is to distinguish between land 
values going up because of agricultural reasons and land values 
going up because of essentially non-ag influences in land 
values.
    Mr. King. And that's why I said producer to producer.
    Mr. Dumler. Right. They've still been going up because of 
land--agricultural uses. And there's a recent survey from 2006-
2007 from the Federal Reserve Bank in Kansas City that said for 
Kansas, anyway, dryland land values went up 7\1/2\ percent and 
irrigated land values went up over 10 percent. So we've seen, 
from the ethanol and bio-fuels effect, quite an increase in 
land values. So that's having quite an impact right now. 
Generally they have been going up over time.
    Mr. King. I appreciate that. And just ask this question, 
it's really not quite hypothetical: You said, though, as an 
economist we like the idea of less market distortion. So I went 
to what would be no market distortion. That would be the 
baseline that one would measure everything off of then, 
wouldn't it. And so I had this sadistic thought of what if, in 
1985, we had let our program sunset. We would have zero market 
distortion for a period of perhaps a generation. What would 
land values be or what would land prices be today? Could we 
function here? What kind of crops would be out here on this 
land we're seeing today? Do you have a sense of what has been 
the effect over the last 22 years of farm programs?
    Mr. Dumler. There was a study by my colleagues at Kansas 
State that was updated in 2006 that they estimated land values 
in Kansas would drop by about 30 percent if government payments 
were removed. Now today, because of basically bio-fuels and 
higher grain prices, we know that that impact would not be that 
steep. It would be significantly less than that if we expected 
prices to remain high long term. So certainly it has helped 
enhance those values or, if you want to look at it from a 
equity standpoint, keep that.
    Mr. King. What about producer income. Would it be the same 
or would it have dropped 30 percent proportionally? Has it all 
been capitalized into land values?
    Mr. Dumler. That's the big debate among economists: what 
percentage of those are capitalized into land values. Some 
would say that it's closer to about 50 percent. Others argue 
it's closer to a hundred percent. I would argue it's probably 
closer to a hundred percent than 50 percent. But income 
certainly would drop. I did a study looking at, okay, if 
payments were removed and the land values fell by that 30 
percent, what would happen to profitability. Basically rate--
rate of return on assets and return on assets would drop as 
well.
    Mr. King. And at this time could I ask you to submit that 
study into the record.
    Mr. Dumler. Sure.
    [The information appears following the prepared statement 
of Mr. Dumler:]
    Mr. King. I'm very interested they even asked that 
question; appreciate that. I'd like to quickly, if I could, 
turn to Dr. Miller. And you mentioned fertilizer costs. And 
we've got something like 406 trillion cubic feet of natural gas 
offshore the United States we can't drill because of 
environmentalist barriers. We've got enough natural gas 
underneath public lands in the United States, non-national park 
public lands, to heat every home in America for the next 150 
years we can't drill. Or if we can, we can't get the access to 
it.
    What would be your recommendation on the fertilizer costs 
recognizing that 90 percent of the input cost on nitrogen 
fertilizer, at least, is out of that natural gas? What would be 
your advice to the environmentalist community that might be in 
charge of some gavels in Washington D.C.?
    Dr. Miller. The people that are standing there saying that 
you can't bring the drills out here if we don't want the hole 
in the ground, those people.
    Mr. King. That's a right hand question.
    Dr. Miller. For myself I have to keep the holes out of the 
ground also, but, I guess, we're in a predicament now where we 
can't have everything. We've got to put the holes in the 
ground. And you have to do it, I guess, in a responsible way. 
We don't want to dig up everything, I don't suppose. But I 
think we have to start exploring our own resources. We can't 
put the whole country into the atmosphere of being a park. I 
think we have to start using what we have, but use it 
responsibly. I don't think we can have 150 years of energy 
under our feet without using some of it.
    Mr. King. Thank you, Dr. Miller. I just want to very 
quickly ask Mr. Rome because I'm dying to ask this question and 
it's a very short answer.
    Mr. Etheridge. Please be quick.
    Mr. King. Was the nun's use of the ruler to teach English 
an effective method?
    Mr. Rome. I think so.
    Mr. King. All right. Thank you.
    Mr. Etheridge. Mr. Smith, 5 minutes.
    Mr. Smith. Thank you. We've heard about land values, 1031 
exchange, certainly implies a discussion of capital gains 
taxes. Mr. Dumler, realizing that in the context of the farm 
bill we do need some revenue to pay for many of the safety nets 
not just in agriculture, but otherwise, would there be a down 
side to repealing the capital gains tax?
    Mr. Dumler. It would certainly encourage additional 
investment perhaps. To be honest I haven't thought about that 
significantly to put a whole--I don't see a huge down side 
right now besides revenue.
    Mr. Smith. You're saying it would result in a decrease in 
revenue.
    Mr. Dumler. From your perspective perhaps, yes. But keeping 
in mind also that people have a tendency to adjust how they 
manage their assets, whether they sell more assets or exchange 
those assets if that tax is there or not in place, it may or 
may not. I mean, I haven't looked at it enough to give you a 
solid answer on that, but I wouldn't expect certainly the 
amount of revenue, if it would drop, to drop in the amounts of 
the capital gains that's taxed.
    Mr. Smith. Okay. Thank you. Dr. Miller, you are a cattle 
producer for which I'm grateful. We've heard about energy 
issues and talked a little bit about the environmental 
activism. I was reading in TIME magazine the other day that the 
writer suggested that eating a T-bone steak or any beef 
product, I will surmise, is as egregious to the environment as 
driving a Hummer. And, I mean, I come from a very cattle heavy 
district and certainly have observed a lot of the obstacles to 
efficient cattle production and effective cattle production.
    What would be the single best thing to do in terms of a 
regulatory manner that would make your job easier and more 
effective?
    Dr. Miller. That is a toughie. I don't know the answer to 
your question. I can't answer that one.
    Mr. Smith. That's fine. When we look at revenue-based 
approaches perhaps, Mr. Rome and Mr. Starck, what would you see 
in terms of payment limitations, what would be the right 
amount? And that might be a tough question too. Payment 
limitation: Would you support payment limitations, and if so, 
at what level?
    Mr. Rome. That's the nice thing about having Mr. Dumler to 
do all the studies and to look at that and that's where K-State 
and the economists fit into it. I think you would have to 
analyze that situation. You know, there probably is some limit 
somewhere, but again you have to evaluate it on what the 
business environment is that we're looking at. So it's sure 
not--it's something that scares us when we hear the term anyway 
with the amount of capital that it consumes to run our business 
is when we see our first combine at $80,000 now be worth over a 
quarter million without a corn head. So right now with the 
current commodity prices due to ethanol and the bio-fuels and 
the other things that are going on, those things aren't as big 
a concern and it doesn't look like it will be in the future.
    But, I guess, we believe in cycles and taking that away, if 
we're going to maintain the size of operations we need to 
produce the food for this country, I'm reluctant to put a 
number out there without having some good justification as to 
why that number fits there. So I'm sorry, I can't give you an 
answer.
    Mr. Smith. Okay. But Secretary Johansen has put out the 
$200,000 number, adjusted gross income.
    Mr. Rome. There are so many loopholes that the devil's 
always in the details. That's been the thing that when we had 
the 2002 Farm Bill everybody thought that was going to be great 
until you put things in the application and that's the way most 
things are, it seems like, is you find out the details that 
don't work and where the loopholes are. So are there enough 
loopholes to work around some of that? Can you create enough 
entities? You know, sometimes it really almost feels fraudulent 
when we talk about the subsidy program and that's probably the 
most frustrating thing being in this seat. I don't know that 
any of us that wouldn't love to receive every bit of our income 
from the market like, it appears, we get for the next few 
years. But that hasn't been the case for the 25 years we've 
been here. So that's again a concern when you put a limit on 
something when you don't have a better crystal ball than what 
we do.
    Dr. Miller. If I may, back to your question, the question 
that you asked me was which government regulation most affects 
the operation. It wouldn't affect an operation like the one 
that we have. All of our cattle are on range. But I would 
imagine that that changes drastically when you get to like out 
here in western Kansas particularly where you have a lot of 
feedlot operations. Government regulations regulating how they 
manage those feedlots, the waste produced at those feedlots, 
that gets to be quite a problem when you have cattle in 
confinement.
    Mr. Etheridge. Thank you. Let me thank each of our 
witnesses for your testimony and your time this morning. And we 
now will ask the second panel, if they will, to come forward.
    (Off the record.)
    Mr. Etheridge. Let me thank each of you for being here. 
And, Mr. Pracht, from Kansas, thank you.
    Mr. Childs from Kansas. We're really trying to save time. 
Mr. Parker also from Moran, Kansas. Mr. Mark Meisinger from 
Kansas. Thank each of you for coming. Your full statement will 
be included in the record. And we'll start with you, Mr. 
Pracht, 5 minutes.

 STATEMENT OF JOHN C. PRACHT, CORN, WHEAT, AND SOYBEAN FARMER/
                    RANCHER, WESTPHALIA, KS

    Mr. Pracht. Thank you very much. I am honored to be here 
and I appreciate all the Representatives for coming down here 
and listening to us complain. As Mr. Moran said, we have hardly 
any money to work with so with what I'm going to say today, 
hopefully I'll get half of what I'm asking for.
    My name is John Pracht and I farm in Anderson County.
    My wife, Reva, and I have three boys. I raise corn, wheat, 
soybeans and cattle. I farm with my two brothers, Bill and 
Dave. My family has been involved with agriculture for many 
generations. We are a true family farming operation.
    The challenges in agriculture are many. The high cost of 
fertilizer, fuel, machinery, property tax, health care and 
mother nature's lack of cooperation are just a few of the many 
items that I, as a Kansas farmer, deal with from day to day. 
Take, for example, liquid fertilizer last fall was selling for 
$160 per ton. This spring the price increased roughly 60 
percent to $260 per ton. As everyone knows, fuel cost has 
followed the same path. The inputs that producers use to raise 
their crops have risen dramatically. These inputs are what 
producers have to have and cannot do without, nor skimp on. 
These inputs dramatically affect our end profit margin, which 
is becoming less every year.
    As for my family and I, we are fortunate enough to have 
health care for now. There are many producers that cannot 
afford it. My neighbor is around 60 years of age. He and his 
wife pay around $1,200 a month for their health care premium. 
I'm paying about half that. I do not know how we will be able 
to afford health care in the future. Every year my health care 
premium increases. This problem has to be dealt with or it will 
be even a bigger problem in the future.
    Property tax, machinery and machinery repair costs also 
rise every year. It is extremely hard for a middle sized farm 
operation to operate with the prices the way they are. For 
example, a new combine lists around $300,000. It makes me sad 
to think that I'm getting roughly the same price for my grain 
as my father did many years ago and his fuel, fertilizer, 
machinery prices were nothing like we have today. Hopefully 
with the help of ethanol and bio-diesel plants the price for 
grain will increase and stay increased. I think that if the 
farmer has higher grain prices that we will be less dependent 
upon government help. But higher prices are not the only piece 
of the puzzle.
    A safety net must be in place in the farm bill for 
disasters like droughts and floods. The new farm bill should 
raise the LDP price to higher levels than they are now. More 
money should be spent for disaster relief in the years we have 
crop failures. I know a lot of talk is to do away with the 
direct payment program, but for me it's nice to know that some 
steady income is coming in. The money spent in the conservation 
program is money well spent, but I believe the program needs 
more money to carry on to benefit farmers as the program is 
intended. I do not think payment limitations should be in place 
for farmers who have higher incomes, if all their income comes 
from agriculture. Investors with other sources of income that 
own farms or ranches should not receive government payments. 
Ranchers with livestock should be included in the farm bill 
also. There is not a price protection for livestock owners like 
the LDP payment for the grain farmer. Emergency haying and 
grazing on CRP or buffer strips need to be released for haying 
in a much quicker time frame. When a drought occurs, livestock 
producers have to rely on buying hay and other feeding material 
to feed their animals which will end up costing them lots of 
money. There needs to be a disaster plan in the farm bill to 
help out cattle ranchers.
    Closing of some of the ASCS offices should not be done. 
This money saved is not worth the inconvenience that this will 
cost.
    I am not in favor of having mandatory animal ID. This 
decision should be left for the producer to decide. Located in 
Anderson County is a large Amish community. I'm sure that they 
are not in favor of this either. A lot of retired farmers have 
a few cows to supplement their incomes. I believe this could 
make some of them sell their cow herds and quit. I hope it has 
been taken into consideration how this might affect people such 
as these. This could lead to weeding out of the little 
producer. It appears like we are getting closer every day when 
issues like this arise to becoming large corporate farms 
instead of family farms. This is what happened to the hog 
producers. I think there would be other less costly and simpler 
ways of having animal ID. I would like to remind you that the 
cattle which had mad cow disease were traced back to the 
original owner without the help of this proposed animal ID 
system. I would support country origin of labeling if we were a 
hundred percent positive that the cattle producer would not 
have to pay for it. I strongly support farm bureau and farm 
credit for bettering life for rural America.
    In closing, I hope that Representatives and Congress can 
keep an open mind, bring all their ideas to the table and leave 
with the best solution. Please keep in mind what is best for 
the people that your decisions will have an effect on. Help 
keep family farms family farms and rural communities from 
extinction. Thank you.
    [The prepared statement of Mr. Pracht follows:]

 Prepared Statement of John C. Pracht, Corn, Wheat, and Soybean Farmer/
                        Rancher, Westphalia, KS
    My name is John Pracht. I farm in Anderson County. My wife, Reva, 
and I have three boys. We hope that they can have a future in 
agriculture, if they choose so. I raise corn, wheat, soybeans and 
cattle. I farm with my two brothers Bill and Dave. If it wasn't for my 
father, I never would have been able to get started farming. My family 
has been involved with agriculture for many generations. I would say 
that we are a true family farming operation.
    The challenges in agriculture are many. The high cost of 
fertilizer, fuel, machinery, property tax, health care, and mother 
nature's lack of cooperation are just a few of the many items that I, 
as a Kansas farmer, deal with from day to day. Take for example liquid 
fertilizer last fall was selling for $160 per ton. This spring the cost 
increased roughly 60% to $260 per ton. As everyone knows fuel cost has 
followed the same path. The inputs that producers use to raise their 
crops have risen dramatically. These inputs are what producers have to 
have, and cannot do without, nor skimp on. These inputs dramatically 
effect our end profit margin, which is becoming less every year.
    My wife, Reva, and I have three kids. We arc fortunate enough to 
have health care for now. There are many producers that can not afford 
it. My neighbor is around 60 years of age. He and his wife pay around 
$1,200 a month for their health care premium. I am paying about half 
that. I do not know how we will be able to afford healthcare in the 
future. Every year my heath care premium increases. This problem has to 
be dealt with or it will be even a bigger problem in the future!
    Property tax, machinery and machinery repair costs also rise every 
year. It is extremely hard for a middle sized farm operation to operate 
with the prices the way they are, for example a new combine list price 
is around $300,000. It makes me sad to think that I am getting roughly 
the same price for my grain as my father did many years ago and his 
fuel, fertilizer and machinery prices were nothing like we have today. 
Hopefully with the help of ethanol and bio-diesel plants the price for 
grain will increase and stay increased. I think that if the farmer has 
higher grain prices that we will be less dependent upon government 
help. But higher prices are not the only piece of the puzzle.
    A safety net must be in place in the farm bill for disasters, like 
drought and floods. With so much money invested in farming today one 
bad year can bankrupt a producer. The new farm bill should raise the 
LDP prices to higher levels then they are now. More money should be 
spent for disaster relief in the years we have crop failures. I know a 
lot of talk is to do away with the direct payment program, but for me 
it's nice to know that some steady income is coming in. Money spent in 
conservation programs is money well spent, but I believe the program 
needs more money to carry on to benefit farmers as the program is 
intended. I do not think payment limitations should be in place for 
farmers who have higher incomes, if all their income comes from 
agriculture. Investors with other sources of income that own farms or 
ranches should not receive government payments. Ranchers with livestock 
should be included in the farm bill also. There is not a price 
protection for livestock owners like the LDP payment is for the grain 
farmer. Lets say hoof and mouth disease was found in America, cattle 
prices would fall and many producers would loose large amounts of 
revenue. Times have changed, if something like this happens the 
American rancher needs a safety net to count on. Emergency haying and 
grazing on CRP or buffer strips need to be released for haying in a 
much quicker time frame. Lets say most of the county where a producer 
lives has received adequate rainfall, and the producer lives in a 
drought stricken area of the county. The USDA will not give the 
authority to hay or graze because the other part of the county has 
adequate conditions, this is not right. I know of cattle producers that 
this has happened to. When a drought occurs, livestock producers have 
to rely on buying hay and other feeding material to feed their animals, 
which will end up costing them lots of money. There needs to be a 
disaster plan in the farm bill to help out cattle ranchers.
    Closing of some of the ASCS offices should not be done. The money 
saved is not worth the inconvenient that this will cause.
    I am not in favor of having mandatory animal ID. I believe this 
program will leave less income for cattle producers. Not just the cost 
of tags will the producer have to pay for. I'm sure sale barns will 
increase their price of operation to be able to pay for the technology 
that has to he bought to make this program work. Packing plants will 
pass the buck on as well. This all adds up to less dollars for us. 
Located in Anderson County is a large Amish community. I am sure that 
they are not in favor of this either. A lot of retired farmers have a 
few cows to supplement their incomes. I believe this could make some of 
them sell their cow herds and quit. I hope it has been taken into 
consideration how this might affect people such as these. This could 
lead to weeding out the little producer. It appears like we are getting 
closer every day when issues like this arises to becoming large 
corporate farms instead of family farms. I think there would be other 
less costly and simpler ways of having animal ID. I would like to 
remind you that the cattle which had mad cow disease were traced back 
to the original owner without the help of this proposed animal ID 
system. I would support country origin of labeling, if we were 100% 
positive that the cattle producer would not have to pay for it.
    In closing, I know that tough decisions have to be made. I hope 
that Representatives in Congress can keep an open mind, bring all of 
their ideas to the table and leave with the best solution. I hope this 
letter can help all of you make your decisions a little easier. Please 
keep in mind what is best for the people that your decisions will have 
an effect on. Help keep family farms, family farms and rural 
communities from extinction.
            Sincerely,

John C. Pracht

    Mr. Etheridge. Thank you, sir. Mr. Childs.

STATEMENT OF BARRY K. CHILDS, VICE PRESIDENT AND FIELDMAN, FARM 
  MANAGEMENT SERVICES, INC.; CHILDS FARMS PTR., BELLEVILLE, KS

    Mr. Childs. Thank you for this opportunity to discuss a few 
issues. I'm a 53-year-old fourth generation farmer from 
Belleville, Kansas, with a BS and Master's in Ag Economics from 
Kansas State University.
    The invitation was to comment on a few challenges ag 
producers are facing. It seems to be very open ended. Since you 
guys aren't in control of mother nature, we'll focus on just a 
few things that the Committee might be able to.
    First would probably be health insurance costs or health 
care insurance. Both availability and the cost continues to be 
a huge problem; possibly deduct them on Schedule F or Schedule 
C depending on your small business.
    Second, simplify how and when the dollars are received by 
producers and their landlords. The CCP concept was a very good 
idea; however, its implementation is almost impossible to 
follow. Quite a few people say they're not sure what they're 
supposed to receive when they're supposed to receive it and I 
guess they do know how. I've included a little chart--flowchart 
simplifying the procedure from the local FSA office and I would 
challenge anybody on the Committee to try and explain the how, 
why and the when to a 90-year-old or an 80-year-old landlord. 
It would be quite dramatic.
    And, I guess, the FSA offices should be applauded and 
thanked for their continued front line support with the farmers 
as far as implementing new procedures and ever-changing 
implementations.
    One possible suggestion might be the direct payments have 
just two simple payment dates: Spring, and Fall. The CCP 
payments, if it's harvested in the summer have it paid in the 
summer. If it's harvested in the fall have it paid in the fall. 
Have a maximum of four payment periods so people know what's 
going on.
    For 30 years I've had a very unique experience of working 
with farmers of all ages and sizes usually around the kitchen 
table. I've considered myself very lucky and extremely blessed 
to have been invited into the financial workings of so many 
farm families. The intergenerational workings of these 
businesses seem to be most challenging and most rewarding.
    This brings me to my third point: Getting young people to 
stay and come back to the farm. A few simple thoughts might be 
to change the recapture depreciation for the first year of 
machinery equipment to an installment sale provision such as 
used on the land. Most of you know that the recapture 
depreciation is taxed in the first year. It wouldn't be a 
change to the total revenue received. It would be a matter of 
the timing.
    Second: Starter loans for farmers. I'm not sure how, in the 
governmental budgeting process, how loans or FMHA or FSA loans 
are figured in your budget. Cities and counties have revolving 
funds; loans are loans; they are paid back. They're secured. 
But this would be a very good opportunity for young farmers to 
know what those loans are and the amount of those loans.
    Now with FSA program there are people that are approved for 
loans, but simply not--they don't know when those loans are 
going to become available.
    The third one is probably the stability of the ag program: 
How else would we tell the young people that agriculture is an 
extremely excellent career? Let me explain why. When you're a 
parent, if you're lucky enough to be one, you talk about their 
future career, what's the first thing that comes up? How a 
future or how that job is--does this job have a future and can 
they succeed at it? Is that job going to be constantly changing 
with regulations and government interference? Will that job be 
used as a political tool? And will the pay scale be known and 
will they be penalized for being successful? I'm sorry to say, 
but our past ag programs have told potential farmers and 
ranchers the wrong thing.
    Now we started with payment limits of $50,000 and dropped 
to $40. If you adjust the 1985 $40,000 limit to today's--or 
just simply inflation, that's almost $78,000. The other thing, 
1985 Farm Bill was an 11 year program. The 1996 fortunately was 
6 years. The 2002 was 5 years and we don't know what we're 
going to have. The stability again is the issue. And again the 
prices are high now. Why can't target prices and loan rates be 
set and adjusted for inflation?
    The CCP payments will not be a liability to the USDA in 
2007. And where is that budgeted money going to go? Why can't 
those unused budgeted funds be set aside for years to come when 
we, unfortunately, will probably need them. Do the same with 
the LDP payments.
    Any future legislation proposed, especially for ag 
legislation: Please have you or your staff do the due diligence 
that needs to be done. But before you decide on anything, make 
one more column in that. And title it: Will this be a positive 
or a negative for the future generations of farmers? If it's 
not going to be a positive, if it's a negative, don't put it in 
there. If it's a positive, however, and telling that next 
generation of farmers that they are needed, they are wanted, 
and we want them to keep producing food and fiber for this 
country and world, pass it and fight for it. How else can you 
explain to that next generation that they're wanted and they're 
needed.
    Again, thank you for this opportunity. We have entrusted 
you with tremendous responsibility for drafting and passing 
this ag legislation. I think that most people understand that 
there will always be short term wants and needs that must be 
addressed. With these decisions, however, always and without 
exception you and your fellow Congressmen and Congresswomen 
must determine whether that's going to be a positive for the 
future generation of ag men and women. We cannot afford to lose 
another generation as we did in the 1980's. Thank you.
    [The prepared statement of Mr. Childs follows:]

  Prepared Statement of Barry K. Childs, Vice President and Fieldman, 
    Farm Management Services, Inc.; Childs Farms Ptr., Bellville, KS

[GRAPHIC(s) NOT AVAILABLE IN TIFF FORMAT]



    Mr. Etheridge. Thank you, sir. Appreciate it.
    Mr. Parker.

  STATEMENT OF GARY PARKER, SOYBEAN, WHEAT, AND MILO FARMER, 
                           MORAN, KS

    Mr. Parker. I thank you very much, Congressman Moran and 
Congresswoman Boyda, Chairman Etheridge.
    I first would like to change one word in my written 
testimony. On page two or second page paragraph two, the 
bottom--the second paragraph up from the bottom, it says 
``recently''--when I'm speaking about a comment I'd made to 
Congressman Moran. Recent for me maybe isn't recent for him. As 
you get older time goes faster. So, Congressman, I do 
apologize. That was over in Emporia at one meeting and so I 
want to insert the words a few years back.
    Mr. Moran. I remember.
    Mr. Parker. Also, while I'm picking on Congressman Moran, 
we have a question whether Moran was named--Congressman Moran 
was named after the city or vice versa.
    In my written testimony I discussed back in Earl Butz' 
tenure that we were encouraged to plant fence row to fence row 
mainly because of exports.
    I am cautious about the fact that we're almost encouraging 
that for the recent avocation of alternative fuels and with 
ethanol and bio-diesel. So with caution I would want the 
Congress to consider some type of floor under crude oil so we 
have some protection for the people that are invested in these 
plants and then also because most of the plants are being built 
by farm monies or with an individual's money and not corporate 
farms and et cetera. I could see in 6 months all of those 
plants being closed or broke for the simple fact the OPEC 
nations could easily cut their crude oil down to $20 or $30 a 
barrel for 6 months and we'd be broke. So I do give caution 
there.
    The other thing that concerns me about planting fence row 
to fence row and putting so much emphasis on our corn and 
soybeans and, et cetera, is debate over food and fuel. Where 
will a public rather put the corn: In their stomach or in their 
fuel tank when it comes to the pinch.
    The importance on government fuel subsidies has to play a 
big part in where we go with alternatives fuels. Other things 
that are needed to be considered are alternate fuels such as 
hydrogen, electric, liquid coal and others. Just last Sunday 
Boone Pickens was in The Wall Street Journal saying that 
ethanol wasn't any good. And I suppose if I was an oil and gas 
producer I would probably say that too. The other point I 
thought was he's had natural gas--we've had natural gas for 
years, but we're not running our cars on it, if this is what 
he's proposing.
    I would like us to think down the road also are the flex 
fuel vehicles that we're promoting now, will they be reliable 
in 10 more years or will we be looking at some other kind of an 
automobile or truck or tractor. I think we need to think that 
and I really am encouraged about the renewable fuel future 
right at this time because I have no other answer for our cars, 
trucks, combines and et cetera, but what we do have is using 
alternative fuel. But I do want you to keep these things in 
mind.
    Another thing, the discussion about the low interest loans 
and grants and in my written testimony I have some criticisms 
about some of the loans that we're giving to young farmers and 
older farmers and the write-offs and et cetera.
    I am an advocate of trying to keep young farmers on the 
farm. Ever since I was a young man and working in some farm 
organization this has been a thing that we've always tried to 
work for is let the farmers stay on the farms. However, I don't 
know what the criteria should be. I can recall back when I was 
a young farmer and my dad's neighbor said to him you might not 
be doing him a favor by giving him a farm. Maybe it's not the 
best possibility of him making an income.
    Our U.S. Government must protect our food and fiber that we 
produce out here on the farm because it is a strategical 
defense for our country.
    The one thing I recall back years ago was being at a Kansas 
State Board Agriculture meeting and a gentleman from a foreign 
country that was overtaken by the Nazis said the reason they 
were overtaken was because they could not feed their people. He 
said, ``This will never happen again in our country because we 
don't care how much subsidy we have to give to our farmers. We 
want to have the food to feed them.'' So this has always kind 
of stayed with me and I think this is a valuable thing to be 
thinking about. We've been blessed in this country to always 
have food, but that's not guaranteed.
    I do support the government's loan and grant for rural 
communities because I think that's one of the only ways we're 
going to keep a viable source of vital rural things going on.
    Concerning bringing young farmers back, I just had--
yesterday I was visiting with a farmer in his 40's and he was 
telling me his son just graduated from Kansas State. I said, 
``Well, you're sure fortunate to have your son come back to the 
farm.'' He's well established. He's inherited money and land. 
He says ``I don't know if it's such a good deal or not. He's 
just not making money like he should if he was in another 
business.'' So I'm sorry to say I don't have any ideas of how 
we can track this other than the fact I do think I mentioned in 
my written testimony that I think the young farmers and the 
farmers that want to stay on the farm and they're smaller 
farmers, if we'd have some type of other type of employment in 
that community helps a lot. Maybe where they could stay on the 
farm, maybe one of the people work or et cetera and that will 
also take care of their--I'm sorry, I'm over time. I'm sorry, 
Mr. Chairman.
    [The prepared statement of Mr. Parker follows:]

  Prepared Statement of Gary Parker, Soybean, Wheat, and Milo Farmer, 
                               Moran, KS
Personal History
    I take great pride in this opportunity to testify before all of you 
today. While I am a scholar on neither farm programs nor agricultural 
policy, my 52 years of farming experience provide me with some 
expertise that I offer as qualifications for my testimony today.
    I began my farming experience in rural Jefferson County in the mid-
1950s. I would likely still be there today were it not for the 
construction of the Perry Federal Reservoir. Both my farm and my 
parents' farm were consumed by the reservoir--offering ample motivation 
to pursue other options. My wife, Janice, and I moved our family to 
Allen County, where we have remained ever since.
    We were blessed with six wonderful children--and six children 
total--and a wonderful life. Each of our children has graduated from 
college and begun successful careers and lives of their own. Rural 
life, I believe, has been a major contributing factor in the 
development of their work ethics and senses of responsibility.
    Although my entire family has benefited greatly from a farm 
upbringing, I acknowledge that we have seen both the good and bad in 
agriculture. While my half-century in this profession has revealed many 
of the negatives in farm programs, I am not here today to criticize 
those programs.
History of Farm Programs
    Yet it is important to note the sheer quantity of programs that 
have come and gone.
    I recall former United States Secretary of Agriculture Earl Butz's 
tenure--a time when farmers were encouraged to plant from fence row to 
fence row.
    I was fortunate to be a personal acquaintance of Secretary John 
Block, and to become intimately familiar with the programs enacted 
during the Reagan Administration.
    I remember farm programs that attempted to entice people to 
continue farming, even when it was the wrong thing for the individual 
farmer to do.
    I have seen poor production farmers acquire low-interest loans that 
they were unable to pay back. These loans were made to farmers 
struggling so mightily that, even when the loans were written off, many 
of the farmers still were forced out of business.
    I have seen young farmers who managed to procure start up-loans, 
only to struggle for years to keep their heads above water.
    These events are not necessarily all bad. But in hindsight, it 
seems that sometimes the government is not doing these farmers any 
favors. The many attempts to assist us remind me of a friend of my 
father, who offered this advice: ``You might not want to give your 
child a farm; you might not be doing them any favors.''
    Doing farmers a favor, however, has been the intent of each farm 
program enacted. Many times it has succeeded--I could not begin to 
imagine the number of farmers such as myself who would not be farming 
today were it not for many of these farm programs. Furthermore, please 
note that no one forces us to live on the farm; we choose this way of 
life, and most of us would not trade it for anything.
    To find continued success at the lives we have embraced, we must be 
skeptical of planting fence row to fence row. This was unsuccessful 3 
decades ago, and probably will not be successful today or in the 
future. We must, therefore, consider carefully our current policies 
with an eye toward improvement.
Successes of Previous Bill
    I realize you have heard a variety of suggestions on the upcoming 
farm program, and I am sure many of them are outstanding ideas. As a 
family farmer in Southeast Kansas, I have few problems with the current 
program. I appreciate the flexibility it offers and would change few 
things about it. There were several successes on which I would like to 
offer comment.
    First, the farm programs that have been a real success are the 
conservation programs. I believe this has effectively aided farmers in 
the preservation of our resources, the purification of water supplies, 
elimination of soil erosion, and several other key areas.
    I commend the Congress for providing additional funding to upgrade 
our waterways, as well as the locks and dams systems. This additional 
funding will not only upgrade river transportation in our country but 
provide safer communities to many served by these rivers.
    The funding of the farm disaster program was critically needed. We 
absolutely need protection from disasters over which we have no 
control. The crop insurance program has been a safety net to at least 
help cover production costs. While I would applaud its expansion to 
cover additional operating expenses, I believe it was a huge step 
toward protecting farmers.
Suggestion: Modify Production Yield History Methodology
    In and effort to protect farmers even further, however, I would 
like to offer a few criticisms and suggestions that could be 
potentially incorporated into the 2007 Farm Bill.
    My primary concern is with the technique employed in determining 
production yield histories. This 4 year average calculation further 
penalizes farmers who already have suffered through extended hardships, 
such as droughts. As yields decrease, the production history continues 
to decline; consequently, insurance production yields and deficiency 
payments go down in lock-step.
    Anecdotal evidence that I have observed firsthand points to the 
shortcomings of the deficiency payment system. If I produce a below-
average crop, I get paid on a low yield; farmers producing bumper crops 
receive large deficiency payments. The allocation of deficiency 
payments simply is not equitable in many circumstances.
    Furthermore, crop insurance programs are often handled inequitably. 
For example, farmers one county south of me can insure soybeans after 
wheat as a second crop. Farmers in Allen County are ineligible to 
insure a second crop, putting us a striking disadvantage to others only 
a few short miles away. Looking farther across the country, friends in 
Mississippi tell me second-crop milo can be insured for $190 per acre. 
Assuming this to be true, chances are many farmers are likely motivated 
solely by the allure of insurance money.
Suggestion: Keep Rural Communities Vital
    As farmers, it is probably unfair to expect the United States 
Government to keep us in business any more than the mom and pop grocery 
stores or shoe stores. However, farmers play a strategic role that 
perhaps other small entrepreneurs do not--the American farmer serves 
the vital role of feeding not only our citizens, but citizens from 
around the globe. In these times of tragic but inevitable worldwide 
strife, food production is one of our country's best defenses. 
Maintaining this defense means maintaining the viability of our rural 
communities.
    U.S. Representative Nancy Boyda has expressed her commitment to 
keeping rural communities vibrant. From the time I was involved with 
American Farm Bureau Young Farmers and Ranchers, this has been an 
overriding concern. Years of observation have convinced me that having 
more and smaller farms in our rural communities will not keep them 
vibrant on their own. Other opportunities must exist in a town to 
combat many rising costs today's farmers must face.
    The rising costs of farm equipment--coupled with the tremendous 
cost of planting a crop--is prohibitive for many prospective farmers. 
Still, small farms and farmers can continue to survive, if not thrive, 
if there is additional employment in the area. To forge an acceptable 
living, many farmers must seek additional full- or part-time employment 
in non-farm-related venues.
    American farmers are willing to adjust and embrace this additional 
challenge. To be able to do so, however, they need small industries to 
locate in rural areas and offer those employment opportunities. As many 
industries have moved overseas in search of low-cost labor, such 
opportunities have become increasingly difficult to find.
Suggestion: Ensure Continued Availability of Affordable and Local 
        Health Care
    The availability of affordable health insurance, health care 
facilities and local medical staff are essential to small American 
farmers. Health care is as important to farmers as many other farm 
programs.
    A few years back I spoke with U.S. Representative Jerry Moran at a 
meeting in Emporia. Commodity prices, I explained, are not the only 
thing making it difficult for farmers to remain on the farm. Health 
insurance costs are a major problem. With such exorbitant costs, it is 
commonplace for at least one member of a farm family to find employment 
off of the farm to pay for the family's health insurance.
    I am encouraged with the current proposal for funding of rural 
health care facilities. The present program provides funding for the 
continued operation of critical-access hospitals in rural communities 
across the United States. The continued availability of local health 
care services is paramount to keeping farmers productive in our 
country.
Suggestion: Address Bio-Fuel Industry Challenges
    Alternative fuels from agricultural products provide us with an 
outstanding opportunity to address one of our country's most pressing 
energy crises. As we continue to make advances in this arena, I have an 
increasing sense of dread at the number of people--especially farmers--
who are making significant and risky investments into bio-fuels.
    My fear is that most of our ethanol and bio-diesel plants are being 
built using the money of rural farmers and other individual citizens. 
These investments are being made as Americans face ever-rising prices 
at the gas pump. A few strategic moves by OPEC to drop crude prices 
could bring financial ruin on this industry and many of its investors. 
In a short time, we would see these new plants would shut down. 
Avoiding such a disaster--as bio fuels struggle to become more 
financially viable--would require the implementation of a price floor 
in oil imports, ensuring that bio fuels can remain financially 
competitive in the short term.
Conclusion
    I have been farming most of my life. American agriculture has been 
a blessing for me and my family, and provided more than most people 
could ever want. It is my sincere hope that great deliberation will be 
given to these ideas and the ideas of others in generating a new farm 
bill that builds on the many successes of past programs while improving 
upon their deficiencies.
    Thank you for the opportunity to offer my thoughts on this topic. 
Please feel free to contact me with any additional questions.

Gary Parker.

    Mr. Etheridge. Thank you, sir.

    STATEMENT OF MARK MEISINGER, WHEAT FARMER AND COW/CALF 
                      PRODUCER, MARION, KS

    Mr. Meisinger. My name is Mark Meisinger. I live in Marion. 
I farm wheat and I also have a cow/calf operation and three 
young boys that help me as much as they can on that. I'd like 
to begin my remarks by thanking the Committee for allowing me 
to testify this morning and for listening to the direct views 
of farmers and ranchers about the farm bill.
    I am not coming before you today to plead for more Federal 
money for farmers and ranchers. Clearly we're going to have to 
learn to deal with less and we need to be aware of that. I 
believe most ag producers would much prefer to receive income 
from the value of the products that they produce. 
Unfortunately, in today's farm economy that is not consistently 
reliable enough to maintain financially sound farms and ranches 
without Federal support.
    The past 10 years of farming have been very challenging as 
far as a Kansas producer is concerned. Low grain prices, 
exploding expenses and difficult weather have made it difficult 
to find the income needed for the family. This exposes the need 
for some kind of farm income stabilization so that we have a 
reliable source of food and fiber for our country.
    Has the current farm bill been sufficient? Yes, it's been 
okay, especially the counter-cyclical support concept, but a 
revenue-based counter-cyclical program or possibly a savings 
account idea that I've heard proposed would be better in my 
opinion. These types of programs are necessary to stabilize 
income in difficult years.
    The recent increase in grain prices has at least provided 
an optimistic view of the future, provided we have a crop to 
sell. The support of crop insurance programs needs to continue. 
We have the expanded use of ethanol to thank for this current 
jump in corn prices. Our country needs to become increasingly 
reliant upon ourselves for our energy and Federal support needs 
to continue in this area. I believe most Americans would rather 
fill up their vehicle knowing they are supporting a Midwest 
farmer instead of a Middle East terrorist. Please continue to 
support the growth of the ethanol industry.
    I hope that our country can move away from direct support 
of farm programs. That clearly is what we see in the picture 
coming towards us in the future. But we do need crop insurance 
products and income stability products that maintain a reliable 
and healthy ag economy.
    One side note I might add, just locally, recently on Friday 
in my local Farm Service Agency office, probably heard it 
before, but the computer system's running very slow. She said 
it was even a good day and yet we are waiting and waiting and 
waiting. So please do what you can to look into speeding up the 
number of servers or whatever needs to be done so that there's 
not so much time spent there. And what's more if that business 
is done at home, it's going to have to be faster because 
individuals aren't going to sit at home waiting and waiting and 
waiting to conduct business at home. Thank you.
    [The prepared statement of Mr. Meisinger follows:]

    Prepared Statement of Mark Meisinger, Wheat Farmer and Cow/Calf 
                          Producer, Marion, KS
    I would like to begin my remarks by thanking the Committee for 
allowing me to testify this morning and for listening to the direct 
views of farmers and ranchers about the farm bill.
    I am not coming before you today to plead for more Federal money 
for farmers and ranchers. I, and I believe most ag producers, would 
much prefer to receive my income from the value of the products that I 
produce. Unfortunately in today's farm economy that income is not 
consistently reliable enough to maintain financially sound farms 
without Federal support. The past ten years of farming has been very 
challenging as far a Kansas is concerned. With low grain prices, 
exploding expenses, and difficult weather it has been difficult to find 
the income to support a family. This exposes the need for some kind of 
farm income stabilization so that we have a reliable source of food and 
fiber for our country.
    Has the current farm bill been sufficient? Yes, it has been okay, 
especially the counter-cyclical support concept. Whether that is left 
in place or we move to more of a savings account idea, it is necessary 
to have a method in place to stabilize income in difficult years.
    The recent increase in grain prices has at least provided an 
optimistic view of the future, provided we have some product to sell. 
The support of crop insurance policies needs to continue. We have the 
expanded use of ethanol to thank for this current jump in corn prices. 
Our country needs to become increasing reliant upon ourselves for our 
energy, and Federal support needs to continue in this area. I believe 
most Americans would rather fill up their vehicle knowing they are 
supporting a Midwest farmer instead of a Middle East terrorist. Please 
continue to support the growth of the ethanol industry.
    I hope that our country can move away from direct support of farm 
programs. But we do need crop insurance products and income stability 
support to maintain a reliable and healthy ag economy.

    Mr. Etheridge. Mr. Robbins.

           STATEMENT OF LEE ROBBINS, DIRECTOR, KANSAS
  CATTLEMEN'S ASSOCIATION; COW/CALF PRODUCER, YATES CENTER, KS

    Mr. Robbins. Honorable Congresswoman and Congressmen, I'm 
Lee Robbins, a fourth generation cow/calf producer from Yates 
Center, Kansas. I'm a Director for the Kansas Cattlemen's 
Association and USD 366 School Board Member. Thanks a lot for 
the opportunity to share with you some of my concerns about the 
beef business.
    My biggest challenges are not with the production of beef 
because I know I can compete very well as a producer.
    My big challenges lie in the marketplace.
    Previous rules by USDA have been detrimental to rural 
communities. I'm convinced that the four major packers control 
USDA whenever a meat issue is at stake. For example, USDA not 
allowing Creek Stone Farms to individually test cattle for BSE 
for export to the Southeast Asia market as they had requested. 
The demand there is huge. Our best USA beef is cheaper on their 
retail shelves than their own locally produced beef.
    Kansas State University did a study after losing our export 
markets to Southeast Asia and estimated it cost us 14 to 15 
percent of our beef's value. In 2006 Kansas' value of beef 
production was $2.9 billion times a 14 percent loss: 
$416,000,000 of lost income to Kansas producers. The loss in 
Kansas income taxes, the $416,000,000 times an average of 6 
percent paid by producers for a total of approximately 
$25,000,000 lost in state income taxes in 2006 alone. If you 
take the producers $416,000,000 times an economic multiplier of 
five then approximately $2,000,000,000 was lost to our 
economies. These figures are just for 2006 in Kansas.
    Imagine the loss to all USA producers and economies. In 
private business customers dictate what they will purchase, not 
the sellers. Recently a judge ruled in favor of Creek Stone 
Farms for individual testing and USDA says it's going to appeal 
so that it will still not be allowed. Simply put, it's not 
about economics because a $50 test yields approximately $150 in 
value.
    Another recent example of USDA working against me as a 
producer is USDA trying to tie mandatory identification to 
country of origin labeling. A simple hot iron brand will 
suffice for COOL identification and cost producers very little. 
Individual ID would be much more expensive to producers, it's 
hard to implicate and it would stop COOL in the long run. Just 
as the packers have told USDA to do. Our beef customers and 
producers want mandatory COOL implemented in the USA and 
deserve to get what they want, whether they're here or 
overseas. So please support mandatory COOL. Current law 
prohibits ID use as verification for COOL so please don't let 
it happen. It's unnecessary and unintended.
    Captive supplies by packers depress live cattle prices. As 
captive supplies go up, live cattle prices go down.
    Without the use of captive supplies, packers will still 
have the same volume of cattle available to them as before. 
They would just have to bid on them in a true, live 
marketplace. I would encourage you to support legislation that 
limits captive supplies by meat packers because it will improve 
producer's profits.
    Let me state in closing that consolidation and vertical 
integration has not been good, in general, for production 
agriculture on the rural economies. If we stay on the same 
trail as we've been on, then rural America will suffer even 
more. We must make some changes to improve profits. I'm not 
alone in my thoughts and opinions and thank you very much for 
your time and consideration.
    [The prepared statement of Mr. Robbins follows:]

    Prepared Statement of Lee Robbins, Director, Kansas Cattlemen's 
            Association; Cow/Calf Producer, Yates Center, KS
    Honorable Congresswomen and Congressmen,

    I am Lee Robbins, a 4th generation cow/calf producer from Yates 
Center, Kansas. I am a Director for the Kansas Cattlemen's Association 
and a USD 366 School Board Member. Thank you for the opportunity to 
share with you some of my concerns about the beef business.
    My biggest challenges are not with the production of beef, because 
I know I can compete very well as a producer. But instead, my 
challenges lie in the marketplace
    Previous rules by USDA have been detrimental to rural economies. I 
am convinced that the four major packers control USDA whenever a meat 
issue is at stake. For example, USDA not allowing Creek Stone Farms to 
individually test cattle for BSE for export to the Southeast Asia 
market as they had requested. The demand there is huge. Our best USA 
beef is cheaper on their retail shelves than their own locally produced 
beef.
    Kansas State University did a study after loosing our export 
markets to SE Asia and estimated it cost us 14-15% of our beef's value. 
In 2006, Kansas's value of beef production was $2,971,488,000.00  14% 
loss = $416,008,000.00 has lost income to Kansas producers. The loss in 
Kansas income tax = $416,008,000.00  6% average paid by producers = 
$24,960.000.00 in lost state income taxes in 2006 alone. If you take 
the producers loss of $416,008,000.00 times an economic multiplier of 
five, and then $2,080,040,000.00 was lost to our economies. These 
figures are just for 2006 in Kansas. Imagine the loss to all USA 
producers and economies. In private business customers dictate what 
they will purchase, not the sellers. Recently a judge ruled in favor of 
Creek Stone Farms for individual testing and USDA says it is going to 
appeal so that it still will not be allowed. Simply put, it's not about 
economics because a $50.00 test yields approximately $150.00 increase 
in value.
    Another recent example of USDA working against me as a producer is 
USDA trying to tie mandatory identification to COOL. A simple hot iron 
brand will suffice for COOL identification and cost producers very 
little. Individual ID would be much more expensive to producers is hard 
to implicate and would stop COOL in the long run. Just as the packers 
have told USDA to do. Our beef customers and producers want Mandatory 
COOL implemented in USA and deserve to get what they want whether here 
or overseas. So please support Mandatory COOL. Current law prohibits ID 
use as verification for COOL, so please do not let it happen. It is 
unnecessary and unintended.
    Captive supplies by packers depress live cattle prices. As captive 
supplies go up, live cattle prices go down. Without the use of captive 
supplies, packers will still have the same volume of cattle available 
to them as before. They would just have to bid on them in a true, live 
marketplace. I would encourage you to support legislation that limits 
captive supplies by meat packers because it will improve producer's 
profits.
    Let me state in closing that consolidation and vertical integration 
has not been good in general for production agriculture and rural 
economies. If we stay on the same trail as we have been on then rural 
America will suffer even more. We must make some changes to improve 
producers profits. I am not alone in my thoughts and opinions.
    Thank you for your time and consideration.


[GRAPHIC(s) NOT AVAILABLE IN TIFF FORMAT]

    

Lee Robbins.


    Mr. Etheridge. Thank you, Mr. Robbins. Let me thank each of 
our panelists for your comments and I will recognize myself for 
5 minutes as we move to some questions now.
    I want to first make a comment regarding the testimony of 
Mr. Childs and Mr. Parker. All of you mentioned in your 
comments and in your testimony about the challenges facing 
farmers in rural America as it relates to health care, about 
the growing costs of health care and health care insurance, how 
that affects Americans in the long run and how expensive it is. 
I wish there was something we could do in the farm bill to help 
that. I think all those in the audience would appreciate that 
as well. However, unfortunately, costs have gone up. However, 
that is not in the jurisdiction of those of us within this farm 
bill. That's not our jurisdiction.
    But I do appreciate, let me say, because your testimony 
will be available to us and we appreciate you sharing your 
personal experiences. We can't solve it in the farm bill, but 
we have to find solutions to these problems, not just for 
farmers, but for all Americans. It is a real challenge and I 
just want to require all of us who work not only in 
agriculture, but in other areas as well, help Americans have 
the necessary insurance they need.
    Mr. Pracht, to you and Mr. Childs, in both your testimonies 
you called for increasing market loan rates and consequently 
marketing of loan rates and loan deficiency payments. Some, 
including the Administration, caution that going in that 
direction is provocative and could increase new challenges to 
our farm programs in the WTO, World Trade Organization. What do 
you think about this argument and why do you think loan rates 
need to go up?
    Mr. Childs. I'm not sure I understand your question 
totally. The loan rates and target prices, I'm not sure how 
they were set in 1996 and what basis they were. Were they based 
on cost of production, yield, revenue? I'm not sure how they 
were based so, therefore, I'm saying that the costs of that 
have gone up, I know, so if that's--if the target prices and 
loan rates were based on that, then obviously those should go 
up also.
    Mr. Etheridge. But when you move toward--the 
Administration's position on this is if you move toward higher 
loan rates then that tends to increase production in those 
areas. Even if they don't do it in the marketplace, they wind 
up under the loan which then creates the problem for the long 
term costs.
    Mr. Childs. For the long term costs of the program?
    Mr. Etheridge. Yes, yes.
    Mr. Pracht. I mean, it's part of the safety net that needs 
to be around. You know, that's just one thing we'd have now 
that I don't want to lose, but if there's another better source 
of means for doing it, I'd be all for it. And, yes, what you're 
talking about would be cost--it's costly.
    Mr. Etheridge. That was the Administration's position in 
there.
    Mr. Childs. What is the true cost of that loan to the 
Administration?
    Mr. Etheridge. And I don't know that number.
    Mr. Childs. I don't either.
    Mr. Etheridge. And I don't know if there's anyone out there 
who knows how they set it in 1996. We need to find out as we 
start moving forward. With that I will yield to the gentleman 
from Kansas, Mr. Moran.
    Mr. Moran. Mr. Chairman, thank you very much. I'll try to 
be brief and get us, as best I can, back on time. On health 
care, one of the things that's in the Administration's proposal 
that makes a lot of sense to me is in regard to rural 
development outside our commodity title, but no interest loans 
to critical access hospitals across the country. And there's 
almost no community in Kansas that we don't rely upon access to 
health care through what's designated under Medicare critical 
access hospital. They have no additional money for building or 
for purchasing equipment and I have been very complimentary to 
the Administration at least in that proposal in regard to the 
farm bill.
    Mr. Childs, you know my ag person, Aaron Pelka, well. Would 
you make sure the two of you get together. I want to explore 
further this land versus equipment sale because I'm certain I 
don't understand what you're telling me: about how if you sell 
equipment it's treated differently than if you sell land. And I 
think that's what you're telling me. Is that true?
    Mr. Childs. Yes, if you buy equipment you depreciate it.
    Mr. Moran. The purchase of the equipment that we're talking 
about, not the tax consequences of the sale of that equipment.
    Mr. Childs. I work with an older generation that would like 
to sell his machinery equipment to a young farmer. All right. 
If he does that, most of the time that equipment is depreciated 
down to zero. If he has a hundred thousand dollars worth of 
equipment, it's recaptured in depreciation. That is all taxed 
in the first year of that contract.
    Mr. Moran. And you're talking about the tax consequence to 
the seller.
    Mr. Childs. To the seller, yes.
    Mr. Moran. Mr. Meisinger, I may borrow your line. You got a 
good political line: Midwest farmer versus Middle East 
terrorist. I don't have to give you credit for it. I'm going to 
use it regularly now. But let me ask you, you're a cattle 
producer and yet are talking about the benefits of ethanol. How 
do you see it as a cattle producer when your input costs are 
increasing due to the cost of corn or grain.
    Mr. Meisinger. I'll respond to that because a cattle 
producer raising cow/calf so the impact to me is not as direct 
as someone who would be feeding. But from my perspective an 
opportunity to finally see, from a grain producer's 
perspective, the opportunity to earn a profit for once on the 
product that we raise looks good finally for once that we can--
I can support my family hopefully because of the increased 
price that we receive. Will it hurt the cattle producer? Yes, 
he's been making money and I've been making money on the cow/
calves that I raise. Will some of that profit come out of the 
cow/calf? Yes, it will. But for me, the opportunity to see an 
increased income and a profit because of the grain that I 
produce is good.
    Mr. Moran. I have been very surprised. You know, the 
criticism of ethanol now is that it's increased the price of 
corn. That's exactly why we got interested in producing ethanol 
is because of the price of corn. And so I remain a strong 
supporter of renewable fuels for a number of reasons, but it 
originally started out, how do we help farmers have some 
profitability for the commodities they grow. In that regard 
about input costs, one of the reasons that the amount of money 
that's available to the commodity title in drafting the 
commodity title in the next farm bill is that commodity prices 
are higher. Therefore, as they score they create a baseline. 
The amount of money that we have to spend on this commodity 
title gets based upon the amount of money we spend today under 
the farm bill. It's less because of higher commodity prices. 
There ought to be a way we can change that and some of you 
suggested--Mr. Childs suggested about how we capture what we're 
not spending and save it for the future.
    Let me ask this question because much of what the debate in 
Washington has been, we've heard a bit of this from USDA: is 
that everything in agriculture is going well with the commodity 
prices. But what I fail to ever hear anybody talk about is the 
increasing input costs. And so as a producer perhaps you could 
explain to me what the consequences are of higher fuel, 
fertilizer, natural gas and other input costs. Has the 
increasing commodity prices that you're receiving for your 
commodities, has that more than offset the increasing costs of 
production?
    Mr. Meisinger. Not yet because we haven't raised the crop 
to sell into that higher market yet. It will help, but the 
increase in costs that we've withstood the last 2 or 3 years is 
not going to be long term sustainable for us at the price that 
we were receiving for our products. It took out the profit 
margin. There was basically no profit. And $1.70 corn across 
the scale, last year 40 cents nitrogen, it did not compute. So 
the increase in grain prices will hopefully--if we can have 
something to sell into that--hopefully help offset those 
extravagant prices because I don't see them coming down 
unfortunately.
    Mr. Moran. Yeah. We've tried to explain to the 
Administration and others that the consequence of higher prices 
unfortunately is lower prices in the future and we know the 
cycle will continue and you cannot base the farm bill upon 
commodity prices that they already take. Thank you, Mr. 
Chairman.
    Mr. Etheridge. The Congresswoman from Kansas.
    Mrs. Boyda. I'd just like to again thank you all for doing 
this in front of everyone and getting it on the public record. 
And I'd like to highlight some things that I've heard out in 
the field so we make sure that in the many comments that you've 
made, I'd like to pull out a couple.
    We are working on an emergency haying provision in the 
conservation credit. And Jerry asked--Mr. Moran asked, too, if 
that's what we were talking about, yes. So your voice has been 
heard on that and that amendment is going in. And I'd like to 
make sure that each one of the panelists understand today what 
we're talking about and why we need some provision to allow 
some emergency haying. Thank you for helping. I didn't 
understand the depreciation either and I appreciate getting 
that done.
    And then one thing that I have heard repeatedly, with the 
anxiety over the FSA and the NRSC offices is the computer 
systems and I'd like to make sure that that's duly noted that 
we really need to make some upgrades on our computer system. So 
as you're making trips back and forth and now over a few more 
counties that, in fact, we have computer systems that do work.
    I'd like to talk about, when you were talking about, Mr. 
Robbins, competition and what--again this is one of the very, 
very pervasive things that I've heard up and down the district 
as I've been out talking--that our rural producers are lacking 
that truly competitive market. And I'd like for you to just 
again talk to me about when you can sell, how you sell, what 
the day to day looks like for you when you're trying to get out 
there and sell your cattle. Do you feel like you have an open 
and free market to do that; a competitive marketplace?
    Mr. Robbins. Well, when I market my cattle I use Superior 
Livestock Auction which is the video auction and I also have a 
couple of local markets that are relatively close. And I market 
most of my production through those tools. I also hedge on the 
board of trade. So as far as my individual market there, I feel 
pretty well covered.
    Now if I decide I want to take my cattle out West and feed 
them, that's where I get pretty scared because I'm at the mercy 
of, as I said, the packers. And you've usually--you're in a set 
time limit. When they're ready to go, if something bad happens 
in the market that's caused by who knows what, you've got only 
a limited amount of time to market those cattle. Now as far as 
if they're in my position at home, I can buy some time.
    Mrs. Boyda. Specifically what would you have the 
Agriculture Committee do?
    Mr. Robbins. Well, pass country of origin labeling. I think 
that would definitely help us. And try to stop some of the 
consolidation in the packing industry. I think that would help 
tremendously. It's not an easy job to do, but I think that will 
help add to our profits and our profits are our profits.
    Mrs. Boyda. And what I hear again around, and I don't mean 
to be putting words in your mouth, but I hear often about 
captive supply and how in fact that's--could you address that 
or what would you have----
    Mr. Robbins. Definitely.
    Mrs. Boyda. What would you have the Agriculture Committee 
do about that?
    Mr. Robbins. I would hope that it could be legislated to 
where the packers can only purchase the cattle within 14 days 
of slaughter. They can't own them prior to that because it 
adds, like I said, to their captive supply and that's how they 
help manipulate the market and depress the market.
    Mrs. Boyda. Thank you. I would just come back on a 
different subject, too, we were talking about the three legs of 
our farm subsidies. We heard earlier in the first panel about 
the direct payments. I didn't hear that in this particular 
panel as much. Real quickly and I only have a few seconds left, 
do I hear that same from you about direct payments? Or are you 
again in the counter-cyclical versus the LDP's as the longer 
legs of that stool?
    Mr. Parker. I think personally that the direct payments are 
much superior because when you don't have crops it's hard. And 
I know I've been in situations where I've been with friends 
from Illinois raising 230 bushel crops and we've raised 40 or 
50 on some drought and they get a huge LDP payment and we 
don't, and I just think it's a fairer way. However, I would 
like to comment on the LDP's because they are monies that come 
in the first part of the year and the last part and this year 
the government cut those percentages down where we only got 20 
or 30 percent of the LDP at the first of the year, which is the 
time when you need the money.
    Mrs. Boyda. I yield back the lack of balance of my time.
    Mr. Childs. I might comment that the total dollars and the 
stability of it is probably more important than the amount.
    Mr. Etheridge. The gentleman from Iowa.
    Mr. King. Thank you, Mr. Chairman. The solution for 
everybody out here is more dollars per acre. You just have to 
figure out how to get that. So we are trying to figure out how 
to get that all together and I appreciate that, but I wanted to 
comment, Mr. Childs, I think you said the single most important 
thing here and it's something that maybe you think that was 
redundant to us, but, you said: ``We have entrusted you with a 
tremendous responsibility to draft and pass ag legislation.'' 
And I think it's important that that's reiterated because that 
needs to be on our conscience at all times. And even though we 
get involved in the policy side of this, but that little 
reminder brings that back up to the top. That's the purpose of 
this and it is a high responsibility. I wanted to just note 
that this panel heard this. And I appreciate that.
    Now, Mr. Pracht, I wanted to talk with you a little, if I 
could, about COOL. A hundred percent positive producer, you're 
a hundred percent positive producers wouldn't have to pay for 
it. I mean, I appreciate that sentiment and that thought, but 
how in the world would we ever get there. So does that mean to 
me that you're--I mean, I have to interpret that means you're 
opposed to COOL because I can't imagine how we'd ever be a 
hundred percent positive that it wouldn't be passed on to the 
producer.
    Mr. Pracht. Yeah, I don't know either and that's a question 
nobody really knows. COOL is good. You know, putting the United 
States logo on our meat and stuff, there's nothing wrong with 
that at all, but I don't want to be the one that has to maybe, 
in the end run, pay for it as coming out of----
    Mr. King. But you don't really have advice for us on how 
we'd ever be sure that the producer isn't paying for it.
    Mr. Pracht. That's exactly----
    Mr. King. And when I look in the meat case in Washington, 
D.C. and I see Australian steaks that are porterhouses at 
$16.25 a pound and U.S. T-bones at, say, $12.25, what should I 
draw for my conclusion there; are they marketing Australian 
beef?
    Mr. Pracht. Yeah, they are.
    Mr. King. And so there are two sides to that coin. They may 
not be equal. I just want to point that out. And then, in 
trying to move along here at the request of the Chairman, and I 
appreciate everybody's testimony. I wanted, if I could, to turn 
to Mr. Robbins. I want to tell you, I agree with your view on 
USDA's prohibition on BSE testing at Creek Stone. The 
government should never intervene in a value added endeavor by 
a producer or a packer or a marketer, especially because there 
was no down side to that. It was their opportunity to add value 
to their product and USDA stepped in. So I agree with the court 
decision. I agree with you, Mr. Robbins. And I wonder, would 
you agree with that statement?
    Mr. Robbins. Yes, sir.
    Mr. King. And then the Creek Stone operation today, is 
there anything that prevents any of the packers from adopting a 
COOL program voluntarily?
    Mr. Robbins. Not to my knowledge.
    Mr. King. But you've got some figures here that show that 
the BSE testing, I presume that's what you're referencing, was 
$50 a head and there's $150 upside to the marketing and I don't 
challenge that. That seems reasonable to me. Creek Stone then 
could also do country of origin labeling on the livestock to 
pay a premium if they could find a marketing opportunity to 
compete against that Australian beef, could they not.
    Mr. Robbins. They could and, in fact, now that I give it 
more thought, that's already being done. They just don't label 
it. Maybe they do label it as USA beef also, but they have 
their own logo just as Tyson has on his that identifies it as 
their meat product.
    Mr. King. At least Creek Stone, but does it say U.S. beef 
born, raised, fed and slaughtered.
    Mr. Robbins. I can't answer that. I don't know that for 
sure.
    Mr. King. So the bottom of my question is if there's a 
marketing advantage to COOL, how come I don't see anybody using 
that out there now? I mean, it's clear when it's BSE testing 
and marketing to Asia. So why don't we have examples anywhere, 
even the smaller private packers, that have been at odds with 
some of the larger operations?
    Mr. Robbins. I assume there probably is and I wouldn't say 
that Creek Stone is not labeled USA beef. I know it's 
identified as being produced in the United States and totally 
produced here and processed here.
    Mr. King. I think----
    Mr. Robbins. The problem is they can't test and that's 
where you lose--that's where they lost their market to Japan.
    Mr. King. They can't actually even trace, though, today, 
can they?
    Mr. Robbins. They can.
    Mr. King. Well, not in a market efficient fashion where 
you'd hang them on a hook and say these are U.S., these came 
from Mexico as feeders, these came from Kansas as feeders. I 
mean, we really can't do that effectively at a marketing 
situation, can we.
    Mr. Robbins. They can. Yes, sir, they can.
    Mr. King. How are they doing that?
    Mr. Robbins. They run it all through their plant primarily.
    Mr. King. How do they trace back to premises of origin?
    Mr. Robbins. They're tied in real close with the individual 
producers.
    Mr. King. Thank you very much. Mr. Chairman, I yield back.
    Mr. Etheridge. The gentleman's time has expired.
    Mr. Smith, 5 minutes.
    Mr. Smith. Thank you, Mr. Chairman. Mr. Parker, if I might 
ask you some questions, and let me just begin by saying that as 
I crisscross the Third District of Nebraska I would say the 
biggest concern in agriculture is inputs right now. Doesn't 
matter how high the price of corn is, with the increasing 
amount of inputs there's a great concern. Now you advocated for 
a price floor for petroleum. Let me also say, just give you a 
background of my approach here I think it's in the consumer's 
best interests that we have good ag policy so we have an 
affordable, efficient and available food supply. Can you tell 
me how a price floor for petroleum would be in the best 
interests of the consumer.
    Mr. Parker. I'm sorry, I guess I don't know if the word 
advocate is proper. I have concerns about it. The people that 
have invested in petroleum plants, especially bio-diesel plants 
and ethanol plants; having any protection of not being sold out 
and by not having some type of a floor. And I'm not the 
original person that I heard it--actually I heard this from the 
Governor of Montana, I think, and he was concerned about liquid 
coal. But his concern and he said in his statement that you 
don't see Wall Street investing in these plants. You see 
individuals. And the reason they don't is because there's no 
protection for it. They're not going to put their money in 
where they could be sold out in a 6 months time and I--
personally I can't see----
    Mr. Smith. Sold out as in closure.
    Mr. Parker. As if the OPEC nations decided that we were 
putting too much and weren't selling enough petroleum base to 
the United States, what would be the fastest way to increase 
that would be just to cut the production--increase the 
production or cut the price in crude oil in the United States, 
which our consumers would buy the cheapest regardless of the 
other economic advantages and put a real strain on the plants 
that we have and the people that have investments in these 
plants. I just think that we ought to be aware of that as other 
things.
    Mrs. Boyda. Would you yield, please, just a moment.
    Mr. Smith. Yes.
    Mrs. Boyda. But you're not suggesting that we have a price 
floor for oil. If the price of oil comes down that's a good 
thing. What you're suggesting is we have a price floor from an 
investment standpoint so people know if it goes below this that 
someway or another we are able to withstand that. Is that your 
suggestion?
    Mr. Parker. Yes, I'm talking, particularly, about imported 
oil, imported crude. Just protect the people that have their 
investments in ethanol plants. A number of people in rural 
areas have really invested heavily in these plants and I could 
see what 6 months would do.
    Mr. Smith. I mean, your written testimony, as well as your 
verbal testimony, did state the implementation of a price floor 
in oil imports. And I'm fearful of government intervening at 
the extreme cost to the consumer and especially ag producers. I 
was talking to a retailer the other day who talked about the 
price controls of the early 1980's saying that retailers could 
not make more than 30 cents per gallon. And when in actuality 
it was roughly a 5 cents margin and so what we found is 
everyone raising their margins up to 30 cents per gallon. That 
is extremely concerning to me and the advocacy of a price floor 
on oil imports does scare me. Thank you, Mr. Chairman.
    Mr. Parker. Can I make one comment, please.
    Mr. Etheridge. Sure.
    Mr. Parker. I guess, like I said, the Governor from Montana 
brought this up and I thought about it. I don't know if that is 
the thing that we need to use. I just think that you as 
Congress-people are really, you know, you're supporting bio-
fuels and I am too, but I think we really need to be concerned 
about the investment we're putting in these plants and whether 
it's based on the floor of oil, we do have some type of a base 
on our wheat and our corn, et cetera, that is logical.
    Mr. Etheridge. Thank you. And let me thank each of our 
panelists today for coming and being--both panels. You've done 
an excellent job. I think this has been a good hearing and now 
I'm going to ask whoever will set the mic up. We're fortunate 
today to have with us the Kansas State Secretary of 
Agriculture, Mr. Adrian Polansky. And I would ask him to come 
forward and make any comments he would like to make before we 
close the hearing.

STATEMENT OF HON. ADRIAN J. POLANSKY, SECRETARY OF AGRICULTURE, 
                  STATE OF KANSAS, TOPEKA, KS

    Mr. Polansky. Good morning, Chairman Etheridge and Members 
of the Subcommittee. Thank you for hosting the hearing today. 
Kansans are certainly proud to have two Members of this 
important Subcommittee: Ranking Minority Member Jerry Moran and 
Representative Nancy Boyda. Both have strong interests in 
success of Kansas agriculture.
    As Kansas Secretary of Agriculture, an active farmer, 
father of an active farmer and daughter-in-law with two 
grandsons hopefully growing roots in that good Republic County 
soil for another generation, I represent a diverse agriculture 
that is a national leader in the production of wheat, corn, 
sorghum and soybeans. And as you know, we are a leader in 
livestock production. We're also moving toward leadership in 
cotton production. In 2005 we produced 87,700 bales of cotton 
placing us 17th in cotton production. We have also climbed to 
18th in milk production. Cash receipts for our farm marketings 
were nearly $10,000,000,000 in 2005. And Kansas ranks 7th in 
food farm product exports, which were valued at $2.7 billion. I 
support the work of the Kansas Farm Bill Coalition and their 
consensus recommendations on the 2007 Farm Bill.
    Kansas agriculture continues to be a significant 
contributor to the economic well-being of our state. We have an 
agriculture tradition and we believe the future lies in our 
fields.
    Increasingly agricultural resources provide raw materials 
for a broad range of nonfood products such as chemicals, 
fibers, construction materials, lubricants and fuels. Bio-based 
and bio-energy products provide new and expanded markets for 
agricultural feed stocks. They will reduce our nation's 
dependence on petroleum and other imported materials and 
diversify our agriculture.
    The farm bill is vitally important to the future of Kansas 
agriculture, to our nation's security and to our rural 
communities. Also, to be equitable, it must be tailored to fit 
diverse agriculture from Kansas to Florida to Alaska.
    I will leave the budgetary issues to the Members of 
Congress and will focus on what I think deserves to be looked 
at to be a part of the legislation.
    First and foremost, the provisions of the next farm bill 
must comply with the World Trade Organization rules of trade 
between nations.
    After that we must ensure a viable safety net for farmers. 
Reducing the protection offered by the existing safety net is 
unacceptable. Production costs, including the cost of land, as 
you've heard, fuel, fertilizer and other inputs, have increased 
dramatically since the current farm bill was enacted. The 
reality is that we have already reduced dramatically the 
effective safety net since passage of the last farm bill. Crop 
farmers cannot survive in the future if we're going back to 
prices livestock producers were historically accustomed to, and 
that is a new reality.
    Preparing for a new generation of farmers is a necessity, 
not an option. Beginning farmers are most at risk if the safety 
net is weakened. New farm policy must provide landowners with 
tax benefit for selling to beginning farmers. We must also 
streamline and enhance the Farm Service Agency beginning buyer 
finance program. Finally, we must allow beginning farmers equal 
crop insurance risk protection.
    While the bulk of Kansas agriculture produces wheat, corn, 
soybeans, sunflowers and sorghum, the value of our specialty 
crop production has doubled in the last 5 years. The Specialty 
Crop Block Grant Program first established in the current farm 
bill should be enhanced. I also believe the Farmers Market 
Nutrition Program is worthy of enhancement, that risk 
management protection should be improved and that farm to 
cafeteria programs should be more firmly established. Risk 
management tools must continue to be improved and a permanent 
disaster program provision should be included in the next farm 
bill. Conservation costs to your program should be strengthened 
and a meaningful working lands program should be enacted.
    It is time to look at enhancements to the Conservation 
Reserve Program. For the least fragile parcels of land enrolled 
in the CRP, USDA should allow up to \2/3\ of those acres to be 
used to produce energy crops under no-till practices. I believe 
this has potential to enhance wildlife benefits and maintain 
the conservation impacts while providing an additional income 
for the farmer and freeing up additional Federal budget 
resources for CRP involvement of our most fragile lands.
    Strengthening the viability of America's farm and ranch 
operations benefits the rural economy. A program that provides 
funding for local, state and farm level programs to encourage 
innovative marketing strategies, new business ventures and 
market or product development is needed. It is also imperative 
that we increase Federal investment in research of cutting edge 
technology to keep us competitive in the world market.
    The farm bill also must make a strong commitment to an 
ongoing, aggressive, renewable energy initiative. We must move 
away from our dependence on foreign oil and reap the positive 
economic impact renewable energy holds for our environment and 
for our nation's farmers and rural communities.
    Biotechnology can help answer the world's need for safer, 
more abundant and more nutritious foods. It can play a part in 
developing competitive cellulosic ethanol production and it can 
give us crops that require less water, important for states 
like Kansas.
    USDA, FDA and EPA can help us reach those goals sooner with 
additional funding that will allow them to improve and speed up 
the permit approval processes.
    Finally, we must eliminate the unfair prohibition on the 
interstate sale of state inspected meat to create new 
opportunities for small businesses in rural communities. It 
also is a matter of fairness, since our foreign meat processors 
that are considered equal to federally inspected plants may 
sell their products throughout the entire United States.
    The upcoming debate on farm policy is an opportunity for us 
to develop policy that preserves existing food production, 
prepares for a new generation of farmers, and promotes new 
opportunities as agriculture continues to evolve to meet new 
needs. The challenge will be to accommodate many points of view 
without becoming polarized in our mission.
    I thank you very much for the opportunity to be honored to 
present some comments this morning and certainly if there are 
questions, I'd be ready to stay after to address them. Thank 
you so much.
    [The prepared statement of Mr. Polansky follows:]

      Prepared Statement of Hon. Adrian J. Polansky, Secretary of 
                Agriculture, State of Kansas, Topeka, KS
    Good Morning Chairman Etheridge and Members of the Subcommittee.

    Thank you for hosting this hearing today. We're proud to have two 
Members of this important Subcommittee: Ranking Minority Member Jerry 
Moran and Representative Nancy Boyda. Both have a strong interest in 
the success of Kansas agriculture.
    As Kansas Secretary of Agriculture I represent a diverse 
agriculture that is a national leader in the production of wheat, corn, 
sorghum and soybeans. And, as you know, we are a leader in livestock 
production. We also are moving toward leadership in cotton production. 
In 2005 our growers produced 87,700 bales of cotton, placing us 17th in 
cotton production. We also have climbed to 18th in milk production.
    Cash receipts for our farm marketings were nearly $10 billion in 
2005, and Kansas ranks seventh in farm product exports, which were 
valued at $2.7 billion.
    I support the work of the Kansas Farm Bill Coalition and their 
consensus recommendations on the 2007 Farm Bill.
    Agriculture continues to be a significant contributor to the 
economic well-being of Kansas. We have an agricultural tradition, and 
we also believe the future lies in our fields.
    Increasingly, agricultural resources provide raw materials for a 
broad range of nonfood products, such as chemicals, fibers, 
construction materials, lubricants and fuels. Bio-based and bioenergy 
products provide new and expanded markets for agricultural feedstocks. 
They will reduce our nation's dependence on petroleum and other 
imported materials, and diversify our agriculture.
    The farm bill is vitally important to the future of Kansas 
agriculture, to our nation's food security and to our rural economies. 
Also, to be equitable, it must be tailored to fit diverse 
agricultures--from Kansas to Florida and Alaska.
    First and foremost, the provisions of the next farm bill must 
comply with World Trade Organization rules of trade between nations. 
After that, we must ensure a viable safety net for farmers. Reducing 
the protection offered by the existing safety net is unacceptable. 
Production costs, including the cost of land, fuel and fertilizer, have 
increased dramatically since the current farm bill was enacted. The 
reality is that we have already reduced the effective safety net 
significantly.
    Preparing for a new generation of farmers is a necessity, not an 
option. Beginning farmers are most at risk if the safety net is 
weakened. New farm policy must provide land owners a tax benefit for 
selling to beginning farmers. We also must streamline and enhance the 
Farm Service Agency's beginning farmer finance program. Finally, we 
must allow beginning farmers equal crop insurance risk protection.
    While the bulk of Kansas agriculture produces wheat, corn, 
soybeans, sunflowers and sorghum, the value of our specialty crop 
production has doubled over the last 5 years. The specialty crop block 
grant program, first established in the current farm bill, should be 
enhanced. I also believe the farmers' market nutrition program is 
worthy of enhancement, that risk management protection should be 
improved, and that farm-to-cafeteria programs should be more firmly 
established.
    Risk management tools must continue to be improved, and a permanent 
disaster program provision should be included in the next farm bill. 
Conservation cost-share programs should be strengthened, and a 
meaningful working lands program should be enacted.
    It is time to look at enhancements to the Conservation Reserve 
Program. For the least fragile parcels of land enrolled in the 
Conservation Reserve Program, USDA should allow up to \2/3\ of those 
acres to be used to produce energy crops under no-till practices. I 
believe this has the potential to enhance wildlife benefits and 
maintain conservation impacts, while providing additional income for 
the farmer and freeing up additional Federal budget resources for more 
CRP enrollment of the most fragile lands.
    Strengthening the viability of America's farm and ranch operations 
benefits the rural economy. A program that provides funding for local-, 
state- and farm-level programs to encourage innovative marketing 
strategies, new business ventures and market or product development is 
needed. It also is imperative that we increase Federal investment in 
research of cutting-edge technology to keep us competitive in the world 
market.
    The farm bill also must make a strong commitment to an ongoing, 
aggressive renewable energy initiative. We must move away from our 
dependence on foreign oil and reap the positive economic impact 
renewable energy holds for our environment and for our nation's farmers 
and rural communities.
    Biotechnology can help answer the world's need for safer, more 
abundant and more nutritious foods; it can play a part in developing 
competitive cellulosic ethanol production; and it can give us crops 
that require less water. USDA, FDA and EPA can help us reach those 
goals sooner with additional funding that will allow them to improve 
the permit approval process.
    Finally, we must eliminate the unfair prohibition on the interstate 
sale of state-inspected meat to create new opportunities for small 
businesses in rural communities. It also is a matter of fairness, since 
foreign meat processors that are considered equal to federally 
inspected plants may sell their products throughout the United States.
    The upcoming debate on farm policy is an opportunity for us to 
develop policy that preserves existing food production, prepares for a 
new generation of farmers and promotes new opportunities as agriculture 
continues to evolve to meet new needs. The challenge will be to 
accommodate many points of view without becoming polarized in our 
mission.

    Mr. Etheridge. Mr. Secretary, thank you for your comments 
and they will certainly be a part of the record. We appreciate 
that. Let me also thank again our panelists and all those who 
have been present. Before we close, I'm going to ask the 
Ranking Member, a good friend, if he has any closing comments 
he'd like to make.
    Mr. Moran. Mr. Chairman, thank you very much. Again I thank 
my colleagues for making the effort to be in Kansas and to 
listen to Kansas farmers and ranchers. I know that Nancy and I 
have very much appreciated the extra effort that you made to be 
here personally.
    My assumption is that if anyone has any written testimony 
they would like to present to the Subcommittee, it will be made 
a part of the record and they need to present that to the 
Committee staff within the next 10 days; 30 days, 30 days it 
won't be too late. I started to believe those time frames in 
Washington; 30 days will be fine.
    I also wanted to point out how much effort has gone in in 
Kansas to our farm groups, both Farmers Union and Farm Bureau, 
as well as all of our commodity groups coming together to 
create a coalition and to develop a uniform set of positions in 
regard to the next farm bill. That's very much appreciated.
    We have three Kansans who are serving in national offices, 
national leadership: Greg Schelor is here. Just recently the 
National Chairman of the Grain Sorghum Producers. John Thaemert 
is here. He's the President of the National Association of 
Wheat Growers. And we have Ken McCauley, who is the President 
of the National Association of Corn. I didn't say the right 
words: National Association of Corn Growers. Thank you. And so 
Kansas is well represented on a national level, but I know 
again that Nancy and I would very much appreciate any input, 
advice and suggestions from any and all of you as we try to 
figure out what we do on behalf of Kansas agriculture.
    And I know that not every Kansan is a farmer or rancher, 
but there is not a Kansan who will not be affected by this 
piece of legislation. And there is no more important piece of 
legislation, no more important bill that will work its way 
through Congress this year that will affect the Kansas economy 
than this one. And so any help that you can give us to make 
sure that we have our feet on the ground and an understanding 
of what's important and what matters to get the job done as 
best we can would be greatly appreciated.
    And again I appreciate the dose of Kansas common sense and 
good judgment that we have right before we leave for our 
nation's capital. It's a good thing. Thank you very much, Mr. 
Chairman.
    Mr. Etheridge. Before we close, let me again thank each of 
you for coming. Thank Jerry and Nancy for their hospitality and 
for yours. They've done a lot of work in helping pull together 
witnesses for our staff and the hospitality of Kansas is as I'd 
always expected it to be when I visit here.
    And let me, I guess, expand what Jerry said. He said--he 
was talking about Kansas. The truth is this bill will affect 
every American. Whether they farm or not, they are consumers in 
one way or another. And it really reaches outside the borders 
of the United States for people around the world who really 
depend on American food products to separate them from hunger. 
So this is an important piece of legislation and certainly your 
input is appreciated.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 30 days to receive additional 
material and supplemental written response from witnesses to 
any questions posed by a Member of the panel and any other 
materials you may want to share and with that ladies and 
gentlemen----
    Mr. Smith. Just briefly, I promise. I made a joke about the 
Nebraska/Kansas State rivalry, but a great example of how we 
can work together----
    Mr. Etheridge. That will cost you greatly.
    Mr. Smith.--is last year I toured the wheat research 
facility in Manhattan. Great opportunity not just for Kansas 
but to Nebraska wheat growers as well and we can share 
information. So I know that working together we can accomplish 
a lot. Thank you.
    Mr. Etheridge. He's trying to get out of the ditch. And 
when you're the state next door you want to get out of the 
ditch real quick.
    Mrs. Boyda. Amen.
    Mr. Etheridge. Okay. With that this field hearing of the 
Subcommittee on General Farm Commodities and Risk Management 
stands adjourned. Thank you.
    [Whereupon, the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
      
   Prepared Statement of William V. ``Bill'' Hanson, Chairman, Crop 
         Insurance Professionals Association, Washington, D.C.
    Chairman Etheridge, Ranking Member Moran and Congresswoman Boyda:

    I want to thank you for holding this important hearing here today. 
The policies that you have responsibility for have a direct and 
dramatic impact on so many people's lives, and I think it is 
appropriate that have this hearing among us, and greatly appreciate 
your listening to the needs and concerns of rural America.
    I am Bill Hanson, and I have worked with and among farmers and the 
agricultural industry for most of my life. For the last 25 years, I 
have been involved with Crop Insurance at the state and national 
levels, working for FCIC/RMA and in the private industry as an agent, I 
also currently serve as Chairman of the Crop Insurance Professionals 
Association (CIPA), an association of agents from around the country 
who are dedicated to service and the success of the crop insurance 
program.
    As you embark upon the writing of a new farm bill, I want to 
emphasize the importance of our Federal Crop Insurance Program, and 
urge the Committee to be very careful not to undermine the program 
which is providing incredibly valuable risk-management tools for 
farmers.
    Before getting into this any further, I should note that whereas 
the farm bill expires in September of 2007, and therefore must be 
reauthorized, the Federal Crop Insurance Act does not sunset. Crop 
Insurance has been deliberately kept separate from the farm bill 
because: (1) it is not meant to be viewed as a government program like 
the farm bill; and (2) it is a complex public-private partnership that 
should be considered separately and carefully.
    However, knowing that money (or lack of money in terms of the 
Federal budget) is an issue in the farm bill, and knowing that some are 
viewing crop insurance as a potential bank or source of offsets for 
other spending needs in the farm bill, I think that it is important 
people understand: (1) why the crop insurance baseline has increased; 
and (2) what are the potential ramifications of trying to take money 
out of the program--the point being that Crop Insurance is the wrong 
place to go for money needs in the farm bill.
    The reason the crop insurance baseline has increased is two-fold. 
First, it is because of the success of the program--more and more 
farmers are purchasing higher levels of insurance. This is exactly what 
Congress intended in 2000 when it passed the Agricultural Risk 
Protection Act (ARPA). Second, the increased commodity prices that 
farmers are enjoying means more risk to insure, which means higher 
premiums and therefore more premium subsidy which the government 
provides. The fact is that if a corn loss is sustained this year, 
instead of being indemnified at $2.00 per bushel for non-revenue 
policies or $3.03 per bushel for revenue policies (last year's market), 
the producer will be indemnified at $3.50 per bushel for non-revenue 
policies or $4.06 per bushel for revenue policies (this year's market). 
It speaks volumes that even though premiums have increased this year, 
most farmers are still buying up at the same levels--they haven't 
dropped coverage levels to make up for the increased cost--to me this 
says that they still find insurance to be necessary and a good deal. In 
any case, it would seem unwise to penalize the program for its success.
    The point is, to the extent you take away from either the delivery 
system, or the levels of support in the crop insurance program, the 
result could very well be a retreat from the ground we have gained 
since 2000, and an actual weakening of the farm safety net at the very 
time we are wanting to strengthen it. Is this really the goal of the 
farm bill?
    Crop Insurance today is an incredibly valuable risk management tool 
for the farmers I serve. Don't misunderstand--the three-piece safety 
net of the 2002 Farm Bill is also important, but it is designed to 
provide a safety-net in times of low prices. Crop Insurance on the 
other hand is designed to be tailored to the particular risks on the 
individual farm, and the particular market risks of the day--and that 
is why it is so important for helping farmers mitigate and manage their 
real risks this year, when prices are generally high.
    Revenue products (CRC, RA) have allowed farmers not only to cover 
production risks, but market risks (declining prices) as well. These 
products not only allow you to protect down-side risks on both the 
production and market side, but it also provides the security needed to 
capture opportunities in the market. For example, many farmers have 
contracted corn 3 years out at great prices--and it is the Crop 
Insurance products that give them the certainty to do this.
    Finally, I think it is worth noting that the structure of the Crop 
Insurance program is no doubt a reason for its success--the partnership 
between the Federal Government and private companies which makes the 
products affordable; and the service-based competition among the agents 
who explain the products and provide essential advice in their service 
to farmers is critical.
    Farmers generally have challenges enough in managing their farm--
and so it is helpful to have an agent who is surveying the many 
policies and products that are available and helping tailor those 
products to the particular needs of the farm. Good agents are 
particularly critical when storms come--as they inevitably do--and the 
farmer sustains a loss. Having an experienced agent who can manage the 
claim during these times is invaluable.
    In summary, while crop insurance isn't new, it is more important 
than ever to thousands of farmers. The ability to tailor coverage to 
each individual operation, obtain coverage at a meaningful level and 
affordable price, secure the coverage from a local, trusted insurance 
professional, and know that the coverage is in place and the fact that 
it can be counted on for financial planning purposes all combine to 
make crop insurance the cornerstone of many farmers' financial and risk 
management plans. These benefits of crop insurance always have and will 
continue to account for the success and acceptance of the program.
    Again, I want to thank you for the opportunity to appear before you 
today and prepare these remarks for your consideration.
                                 ______
                                 
Prepared Statement of Joe Kejr, President, Kansas Association of Wheat 
                        Growers, Brookville, KS
    Dear Honorable Chairman Etheridge and Subcommittee Members,

    Thank you for the opportunity to provide written testimony 
regarding the 2007 Farm Bill on behalf of the wheat grower members of 
the Kansas Association of Wheat Growers (KAWG). We have several members 
in the audience today who recognize this legislation's large impact to 
the agricultural communities of Kansas. Our testimony provides an 
overview of our state's wheat industry, our policy recommendations for 
the programs of the commodity title programs, as well as several 
recommendations for crop insurance.
    On average, Kansas is the largest wheat producing state. Nearly \1/
5\ of all wheat grown in the United States is grown in Kansas; this is 
why it is called the ``Wheat State''. Kansas is also the number one in 
flour milling in the United States.
    Kansas produces hard winter and soft winter wheat. Winter wheat 
planting in Kansas takes place in the fall, from late September through 
October. In the spring, the wheat comes out of dormancy with the warm 
weather and spring rain and grows to maturity. Kansas wheat is 
harvested in the summer, from late May through early July.
    Kansas wheat producers deliver enough wheat each year to bake 36 
billion loaves of bread and enough to feed everyone in the world, over 
six billion people, for about 2 weeks. One acre of Kansas wheat 
produces enough bread to feed nearly 9,000 people for 1 day, and we 
plant more than 10 million acres per year.
    The Kansas wheat industry is not only essential for feeding the 
world but looks forward to contributing wheat straw into cellulosic 
ethanol production in the near future. Maintaining our wheat industry 
contributes nearly 20,000 jobs, $1.9 billion to the state's economy and 
the heritage that comes with being the ``Breadbasket of the World''.
    Through our policy development process, Kansas wheat growers 
participated in producing the National Association of Wheat Growers 
(NAWG) Title I Proposals which recommend a direct payment for wheat to 
be increased to $1.19 per bushel and that the target price be increased 
to $5.29 per bushel, while maintaining the marketing loan program as 
currently structured.
    This level is needed to provide an adequate safety net for wheat. 
Since 2002, wheat growers have ONLY received direct payments, not 
counter cyclical or LDPs. Two-thirds of Kansas wheat producers surveyed 
identified the Direct Payment as the most important program for their 
wheat operation. These fixed, reliable payments are non-trade 
distorting, depended upon by lenders for farm financing, and do not 
evaporate in a drought.
    According to USDA data, historical input costs for 2005 and 2006--
the most representative of forecast production costs over the term of 
the next Farm Bill--averaged $215.79 per acre. The average yield, on 
the other hand, has stayed around 38 to 42 bushels. Using these 
numbers, the average cost to produce a bushel of wheat is around $5.29 
while the average market price over the term of the 2002 Farm Bill has 
been approximately $3.40 (2003-2005). While most wheat growers purchase 
crop insurance and rely on it heavily, affordable coverage is typically 
limited to 65 to 70 percent of expected yield. Wheat growers expressed 
concern, therefore, about ensuring that a safety net exists for the 
other 30 to 35 percent of the crop. By providing a safety net to wheat 
growers of $1.19 per bushel in the form of a direct payment, Federal 
farm policy can assure growers, their families and their bankers that 
they have a predictable and dependable safety net.
    KAWG has examined a number of revenue assurance programs but has 
yet to find one that will provide adequate support for wheat growers. 
These programs do not work well in areas like Kansas where we have 
widely variable climatic conditions and agriculture production yields. 
Because of those variable factors many Kansas crop acres are planted to 
wheat, a crop that endures those conditions. In order to meet WTO 
obligations, these programs are normally capped at 70 percent 
coverage--not viable coverage of risk from a business perspective.
    In fact, if a revenue assurance program had been a component of the 
2002 legislation, wheat growers would have received a small payment in 
only 1 out of the past 5 years. This is the same period of time that 
Kansas wheat farmers have incurred multiples crop disasters due to 
drought, flood and freeze. Thus none of the revenue scenarios that have 
been presented to this point provide any ``safety net'' for Kansas 
wheat farmers.
    Over the past 7 years, Kansas producers have developed an intimate 
relationship with crop insurance and this year we continue to have that 
connection. These experiences have gone into these policy 
recommendations for crop insurance.
    Through the drought western Kansas wheat producers have seen a 
significant decline in their t-yields. We join 20 other Kansas 
agricultural organizations in supporting that if a county is declared 
as a disaster, then the Risk Management Agency would plug in full t-
yield or the farmer's actual production history (APH), whichever is 
higher. This drought has also brought forward concerns with production 
history that combine continuous and summer fallow fields in the same 
unit. These are two separate production techniques that result in their 
own production history and they should not be lumped together. 
Additional concerns regarding production history include the ability to 
keep this history in situations where producers develop a cash rent 
arrangement with their landlords as they do with a share rent 
relationship. Finally, we believe that longer production histories 
result in more stability with regard to crop insurance claims.
    Through this year's Easter freeze to central Kansas' wheat crop, we 
have identified a need to redefine when a crop is heading vs. headed. 
In adjusting the crop for damage prior to the crop being headed, 
adjusters count every green tiller as tillers that will continue to 
produce to maturation. Wheat producers are well aware that this is 
never the case and that continued development of the plant will result 
in only a fraction of those tillers developing to full maturity. This 
procedure should be adjusted for scientific and actual production 
knowledge. Additionally, the RMA determination for a second crop on 
that field is too late. We would propose that RMA work with respected 
researchers to come up with more accurate date for determination of 
heading date.
    Administratively, our producer members recommend that RMA have 
state offices, similar to the Farm Service Agency and the Natural 
Resources Conservation Service, for closer contact with producers 
rather than regional offices. We would also suggest the inclusion of a 
state producer review Committee for this agency.
    Finally, we would like to share our support of Congressman Moran's 
proposed amendments to the Conservation Reserve Program (CRP) and 
Conservation Reserve Enhancement Program (CREP). CRP has had a large 
impact on the state of Kansas and our rural communities with 3 million 
acres enrolled over the 20 years of the program. By allowing the 
harvesting of biomass resources from CRP acres for ethanol production, 
we will further our country's goal of energy self-sufficiency as well 
as add to the economic development in our rural communities.
    Additionally, our state has developed a CREP for water conservation 
of the Ogallala Aquifer. Our rural communities developed with irrigated 
agricultural production and this plan for conservation will have a 
dramatic effect on them. Allowing dryland agricultural production on 
acres enrolled into this CREP will accomplish the goal of reducing 
irrigation through retiring over-allocated water rights while 
transitioning these economies into this lower input production option. 
Dryland production will support the local rural economy through 
continued agricultural production.
            Sincerely,


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Joe Kejr,
  President.
                                 ______
                                 
 Prepared Statement of Paul Penner, Vice President, Kansas Association 
                    of Wheat Growers, Hillsboro, KS
    Dear Honorable Chairman Etheridge and Subcommittee Members,

    Thank you for the opportunity to provide written testimony to the 
Field Hearing held Tuesday, June 5, 2007 at the Campus Center at KSU 
Salina, 2310 Centennial Road, Salina, KS. We would like to provide our 
response to further inquiry of the panelists regarding the 2007 Farm 
Bill on behalf of the wheat grower members of the Kansas Association of 
Wheat Growers (KAWG).
    The discussion at the hearing included the impact of higher grain 
prices on operations with grain and livestock segments. As wheat 
producers we appreciate receiving higher prices for our crops in the 
marketplace but it does not lessen the importance of having a reliable 
safety net for agriculture production during low price cycles. During 
these up-cycles in crop prices, livestock producers choose wheat as 
feed grain and as a grazing option for livestock nutrition.
    Much discussion was held on the impact of government program 
payments on land values. All the value of agriculture land whether from 
the marketplace, program payments or recreation is eventually 
capitalized into value and rents. Land is a highly valued asset in our 
country as a stable investment and as valuable collateral for 
production agriculture that depends upon financing. Wheat producers 
have identified direct payments as a reliable system of Federal support 
for maintaining agriculture production on our land.
    The panelists clearly reiterated the importance of direct payments 
as compared to loan deficiency payments and counter cyclical payments. 
The wheat producers of Kansas have depended on these payments through 
the weather and market cycles of agriculture production and we insist 
that these payments be strengthened in the next farm bill.
    Regarding the discussion about repealing capital gains tax, wheat 
growers support the reduction of capital gains taxes. Additionally, 
some of the discussion of the Subcommittee meeting focused on potential 
incentives for young and beginning farmers. We would support a lower 
capital gains tax for land transfers and capital purchases to qualified 
beginning farmers. A capital gains tax incentive to sellers who 
transfer land and capital to a beginning buyer would assist with one of 
our primary concerns in agriculture, the future generation of 
producers.
    Regarding payment limits, wheat growers oppose further payment 
limitation reductions and would request a commensurate increase in the 
payment limitation to accommodate the direct payment increase.
    Thank you for this opportunity to provide comments.
            Sincerely,


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Paul Penner,
  Vice President.
                                 ______
                                 
   Prepared Statement of Ken Winter, President of the Board, Kansas 
               Cattlemen's Association, Junction City, KS
    On behalf of the Kansas Cattlemen's Association, I appreciate the 
opportunity to provide comments on the challenges of Kansas agriculture 
as it relates to the farm bill. Kansas has a rich history of 
agriculture and is the second largest cattle producing state in the 
country. With over six million head of cattle in production each year, 
producers have a vested interest in the farm bill and current 
legislation.
Background
    Since 1994, more than 122,000 cattle ranches and farms have closed 
down or left the beef cattle business.\1\ In 1997 the average family 
farm consisted of only 487, and farming and ranching families often 
depend on off-farm income for their livelihood.\2\ The rancher's share 
of each retail dollar earned on beef was 47 cents in 2005, down from 
56 cents in 1993.\3\
---------------------------------------------------------------------------
    \1\ U.S. Department of Agriculture, National Agricultural 
Statistics Service Agricultural Statistics Database, U.S. and All 
States Data--Cattle and Calves, 1994-2005.
    \2\ U.S. Department of Agriculture, Economic Research Service, July 
9, 2002.
    \3\ USDA Economic Research Service, ``Beef Values and Price 
Spreads,'' available on-line athttp://www.ers.usda.gov/briefing/
foodpricespreads/meatpricespreads/.


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    Family producers are efficient; however, control of the agriculture 
industry by large corporations has adversely affected family 
production. Independent cattle producers are at the mercy of large 
corporate packers. The Packer's and Stockyards Act was introduced in 
1921 to protect producers from of a small number of meat packers 
controlling the livestock markets. The act bans price discrimination 
and manipulation, and other unfair and deceptive practices; yet the 
Packers and Stockyards Act has not been enforced as acknowledged by the 
USDA Inspector General. His report detailed the failure on the part of 
the Grain Inspection, Packers and Stockyards Administration to enforce 
the Packer's and Stockyards Act.
Examples Within the Feeding Sector
    As a commercial cattle feeder I find it increasingly difficult to 
find real competition in the fat cattle markets. We are located in 
Dodge City, Kansas where there are two packing plants with in 2 miles 
of our front door, another located 70 miles to the south at Liberal, 
and one 60 miles West by Holcomb, Kansas. These plants have a slaughter 
capacity of well over 15,000 head per day. We have a thirty thousand 
head, one time capacity, feed yard and market from 1,000 to 3,000 head 
of live cattle to the packers each week. Our location would seem to be 
in the heart of demand for South West Kansas, but not so.
    Each week we put out a list of market ready cattle for the three 
packers, Excel, Tyson, and Farmland, to look at and bid on. Twenty 
years ago when the same physical facilities were owned by Excel, Hy 
Plains Dressed Beef, National, and IBP, we had four bidders weekly in 
our yard. Sometimes sleeping out overnight just to be first to get a 
list and bid on our cattle. Today IF three buyers show up at the yard 
they will come in Monday, Tuesday, or Wednesday, and more to get an 
inventory of available cattle in the industry than to bid on cattle.
    Excel is the only packer that consistently shows up each week with 
a bid on our cattle. National has not been to our yard for maybe 6 
months, Tyson comes in most every week. Tyson and Excel show interest 
and indicate a willingness to buy cattle most every week, but when the 
trade takes place only Excel is timely with a true market bid while 
Tyson will call after the trade takes place to see if we have anything 
left over to sell at a discounted price. National would take all cattle 
that we would turn in on their grid or at the high of the week, but we 
refuse to sell that way. National's grid cattle must be turned in on 
Tuesday, before any trade takes place, National has the right to start 
slaughtering the cattle Wednesday, again before any trade has been 
established, and the cattle are then priced according to their 
performance in the packing plant but based off of the cash price to be 
established sometime later in the week. You give the cattle to the 
packer and have no idea what the price might be. This is a far cry from 
having packers camp out on your door step just to get in line to bid.
    In the industry today there are many undisclosed deals between 
packer and producer all with the promise of getting more money for the 
producer who enters into these arrangements but with no regard to the 
overall lowering of the market through reduced competition. Branded 
products are an excuse used by the packers to justify their 
arrangements to procure a consistent supply and quality of cattle. When 
in fact what this does is keep the packer from competing in the cash 
market to out bid other packers for these cattle. Producers will supply 
through breeding, feeding, sorting, or verifying what ever the packer 
is willing to pay most for. But the packer has found out that if he 
pays the same price for all cash cattle regardless of quality that he 
can drive producers into grid, formula, and branded programs to receive 
a premium over cash which encourages the best cattle out of the cash 
market leaving the lesser quality cattle to set the price on all 
cattle.


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    The reported cash market in my opinion/experience is much less than 
what is reported. When you take into consideration cattle sold at the 
high of the week and other similar undisclosed arrangements, cash may 
be as thin as 25-30% of cattle sales on any given week. If transactions 
took place like this on the CME or the CBOT people would go to jail, 
just ask Martha Stewart. When you drive on the highways across our 
country you must obey the laws for the protection and safety of all, as 
cattle producers we ask nothing more. We need enforceable rules that 
allow everyone to know what is going on. We need to know what is 
trading, to whom, at what price, and when. All need access to the 
market who have like product. Special deals, that include some and 
exclude others does not provide fair equitable access to the market 
place.
    The Kansas Livestock Association always responds with ``we are not 
going to tell our producer how to sell cattle'' which is the same as 
promoting these under the table deals between packer and producer which 
limits what other producers can do. Cattle need to sell in an open 
market system, where all hands are on the table.


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Opportunities for Congress
    It is imperative that the Congress mandate and ensure the proper 
enforcement of the Packers and Stockyards by establishing an Office of 
Special Counsel at USDA to oversee both investigations under, and 
enforcement of the Act. It is essential that Congress amend the P&S Act 
to prevent unfair or deceptive practices, to define ``unreasonable 
preference or advantage,'' and to correct a recent misinterpretation by 
the U.S. appellant court system: a meatpacker should not be allowed to 
avoid the P&S Act's jurisdiction by claiming it engaged in unfair 
market practices (that are harmful to the economic wellbeing of 
producers) in order to maintain competitiveness with other meatpackers, 
that are likewise engaged in the same unfair practices. Producers need 
to be assured that Congress will not allow unfair and anti-competitive 
market behavior to take place.
    To maintain and increase the cash value of cattle, there needs to 
be an increase in competition and an enhancement of fair practices in 
the industry. Steps need to require a certain percentage of daily 
slaughter to be purchased from the cash market. Congress needs to 
ensure that there is transparency among contracts between packers and 
producers. Competition is imperative to the livelihood of independent 
producers.
                                 ______
                                 
  Prepared Statement of Kurt Kocher, Cloud County Producer, Glasco, KS

                              July 5, 2007

    To Jerry Moran and Nancy Boyda;

    The farm bill expires in Sept. of 07 and several things need to be 
continued in the new draft. Winter wheat will be planted as the new 
bill will be implemented, it concerns me that the crop insurance 
program which is an integral part of our marketing program, may change. 
This change may affect the way we do our risk management. Some of the 
area farmers were not aware there was a possibility of doing away with 
the subsidizing of their premiums. Their initial response was dropping 
it all together. I don't believe this is the right answer. I equate it 
to a car that is out of gas and has a flat tire, you put in gas and fix 
the tire, you don't shove it off the cliff. The costs that producers 
have to cover have continued to increase dramatically in the last year 
or so. Current crop prices will help offset expenses, to hopefully 
realize a respectful margin. What about future expenses and prices?
    The bottom-line is this: continue to support the crop insurance 
program and work to enhance it to make it a better risk management tool 
for producers to use. With good risk management by ALL producers a 
disaster assistance program would no longer be necessary.
            Respectfully submitted.

Kurt Kocher,
  Cloud County Producer.
                                 ______
                                 
   Prepared Statement of Edie Dahlsten, Vice President, Kansas Farm 
                         Bureau, Manhattan, KS
    Chairman Etheridge and Members of the Subcommittee on General Farm 
Commodities and Risk Management, welcome to Kansas! Thank you for the 
opportunity to appear before you today and share the views of Kansas' 
farmers and ranchers as we enter this critical time for American 
Agriculture. My name is Edie Dahlsten and I serve as the Vice President 
of Kansas Farm Bureau.
    Kansas Farm Bureau is the state's largest general farm 
organization, having 40,000 members who actively earn their living from 
farming and ranching. Additionally, Kansas Farm Bureau is part of a 
nation-wide organization, the American Farm Bureau Federation, 
consisting of over six million members from all fifty states and Puerto 
Rico.
    My husband and I operate a 3rd generation family farm in McPherson 
County, Kansas where we produce wheat, soybeans, milo and corn on a 
100% no-till operation. In 2000 we closed out a successful farrow-to-
finish swine operation and changed our grain operation entirely to the 
no-till system. We, like so many in this part of the state, understand 
the all too recent reality of the challenges Mother Nature--farming's 
best friend and worst enemy--can inflict on agriculture. Early this 
year we were optimistic and excited about the prospects for 2007. The 
wheat was beautiful, a full profile of moisture was ready for spring 
crops and in many parts of this state, agriculture was set for a banner 
year. The challenge began on Easter weekend, when much of the state 
experienced several days of crop-killing temperatures. The central part 
of the state--where you sit today--has been the most devastated with 
estimates of as much as 50% to 100% loss in many fields.
    We are here today to talk about how you can help best position 
production agriculture across Kansas and the nation to combat the 
unknowns at home and in the world marketplace. With that in mind, I 
want to share with you several solutions that Kansas Farm Bureau 
supports as you move forward in your discussions about the 
reauthorization of the farm bill. It is important to note that we like 
many other groups support the basic structure of the 2002 Farm Bill--it 
has worked well for many and can continue to provide with us with a 
strong foundation going forward.
Supporting the Structure of Farming
    Solid foundations are important to success. In farming, operators 
rely on direct payments, counter-cyclical support, and marketing loan 
payments as the foundation for their businesses. The three-legged 
structure of our current safety-net should be maintained.
    Direct payments represent a $5.2 billion investment according to 
the CBO baseline. This investment helps farmers meet the day-to-day 
capital requirements on their farms and ranches and provides 
consistency in net farm incomes. Direct payments provide stability 
which insures production agriculture against the inconsistent nature of 
commodity prices caused by fluctuations in the world market or weather. 
In the end, U.S. consumers benefit in that their small investment 
provides consistently affordable food, fiber, and increasingly, fuel. 
We support continuation of this essential element of the current 
program.
    While the Counter-Cyclical program of the 2002 Farm Bill has worked 
well in many instances, producers who have experienced yield reductions 
due to weather in times of higher prices have not benefited from the 
program. This is especially true in the northwestern counties of 
Kansas, where 6 to 7 years of drought conditions have resulted in few 
bushels harvested in a time where prices, especially for wheat, have 
been high, resulting in few payments when many producers needed them 
most. Likewise, at times, other producers have received payments when 
yields have risen but prices have been low so payments have been made 
even though farmers may not have needed the support.
    For those reasons, Kansas Farm Bureau supports the implementation 
of a revenue-based counter-cyclical program where payments would be 
triggered by a shortfall in state crop revenue rather than a shortfall 
in the national average price. This modification would allow the 
counter-cyclical payment to fulfill its roll as a key component of the 
farm safety net.
Assistance for Those Who Need It
    One need not travel far from here to see the impacts of weather 
related disaster and thus the need for permanent assistance for those 
producers impacted. As you're already aware, the current practice of ad 
hoc assistance seems to have run its course--they are difficult to pass 
and public perception is not necessarily well informed nor is it 
favorable. Kansas Farm Bureau supports the development of a county-
based catastrophic assistance program available in counties with 
sufficient adverse weather to be declared disaster areas. The program, 
proposed by the American Farm Bureau Federation accomplishes several 
goals. First, by re-rating crop insurance and using a minimal producer 
fee, it provides coverage within existing budget baselines. As you all 
have heard as recently as the fall of 2006 from our President Steve 
Baccus, KFB is not completely enamored with the current structure or 
state of the crop insurance industry. We believe that in addition to 
the benefit of a permanent catastrophic assistance mechanism you also 
have the opportunity to inject competition and affordability into the 
crop insurance system during this process.
    Second, the AFBF catastrophic assistance program would focus on 
losses below 50 percent of normal production for all crops--providing 
producers of any commodity with a baseline of coverage and protection. 
Additional crop insurance coverage could then be purchased up to 
traditional levels of coverage providing protection against production 
shortfalls.
    Ultimately, we believe that ensuring farm revenue through the 
counter-cyclical proposal above when combined with the standing 
catastrophic assistance program just discussed will result in an 
integrated and affordable farm safety-net for American producers. A 
shift which makes our producers better positioned to succeed in a 
global agricultural market.
Accessing Markets and Trading Partners
    Part of the challenge in farming and ranching, like any business, 
is in identifying and securing consumers for our products. That need 
for new and expanding markets implies our participation in the WTO 
process. While some have begun these discussions with the concept that 
the United States should re-align its farm programs in anticipation of 
compliance with a future agreement in the stalled talks, we believe 
that approach to be premature. One of the tenants of our farm policy 
has always been its ability to level the playing field in the global 
market. We should not amend that practice based on unknown outcomes of 
the negotiations. Farmers and ranchers are willing to lower farm 
program payments as part of the WTO negotiations only when we can 
secure opportunities to sell products overseas.
    Second, until that agreement is finalized, we believe that it is 
critical to continue to provide Trade Promotion Authority to the 
President to facilitate our ability to identify and negotiate access to 
the markets of individual nations. Through this authority, we can 
continue to pursue opportunities in an efficient and effective manner 
until broader agreements can be reached.
Flexible Conservation and Energy Opportunities
    While we realize that this is not the Subcommittee with 
jurisdiction over conservation or energy. However, it's not often that 
we have the opportunity to entertain Members of the House Agriculture 
Committee. Given that we wanted to mention several priorities of Kansas 
Farm Bureau in other areas.
    First, it's important to note that our membership is well aware 
that stewardship of the land and success in today's market are linked. 
With the rising cost of fuel and fertilizer it only makes sense to 
employ farming practices that minimize those input costs. To that end, 
many of our members have and continue to employ no-till and minimum 
till practices, participate in CSP and EQIP, and to look for 
opportunities to maximize their values through enhanced water 
conservation.
    It's the opportunity for water conservation that we are most 
concerned about today. The State of Kansas recently began negotiations 
with USDA to establish a Conservation Reserve Enhancement Program 
(CREP). The goal of that program was water conservation, and the target 
was an area of the state, above the Ogallala Aquifer, where water 
levels have declined to a critically low level. Part of the proposal 
would have allowed producers to dry land farm enrolled acres--this was 
rejected by USDA. We would ask for your assistance in clarifying the 
law so that where the goal of the CREP is water conservation, dry land 
farming could be allowed by USDA.
    The second conservation issue that we wanted to mention today is 
the concept that bio-mass products such as switch grass could be grown 
and harvested from CRP acres. We're also supportive of this change 
which will facilitate continued expansion of the growing renewable 
energy segment.
    Finally, KFB believes that the new opportunities in energy 
represent a part of the future of agriculture and rural America. We've 
signed on as a partner in support of the 25 X '25 initiative in hopes 
that as a nation we will continue to pursue this important initiative. 
We also believe that the current farm bill debate provides new 
opportunities to fund innovative research into cellulosic ethanol and 
other renewable sources.
Rural Development--Positioning for the Future
    The need for new markets, development of new products, and 
identification of new economic opportunities has never been more 
prevalent than it is in rural America today. Many of our communities 
have experienced over a century of out-migration resulting in the loss 
of youth, leadership, and the reality that at the passing of the 
current generation, vast amounts of wealth will transition from rural 
areas to the cities and suburbs.
    While current funding within the Rural Development Title benefits 
infrastructure and health care access--both important to rural 
communities, we believe that those dollars should be refocused to 
support development of entrepreneurial activity, identification and 
encouragement of leadership, recruitment and retention of young people, 
and the creation of opportunities for local wealth generation and 
philanthropic activity. These tools will enable rural communities to 
create a bright future using existing resources and human capital.
Conclusion
    Thank you once again for the opportunity to share the views of our 
members. We realize that there are no easy solutions to many of these 
issues, and that there are many who simply favor shifting funding from 
currently successful programs that equip our members for success. We 
believe that there are workable solutions and that consensus can be 
reach in a way that maintains production agriculture as a vibrant and 
productive component of our economy and our nation. Kansas Farm Bureau 
stands ready to assist as you seek solutions for America's farmers and 
ranchers.
    Thank you.
    For more information please contact:

Edie Dahlsten,
Vice President,
Kansas Farm Bureau,
Manhattan, KS 66503;
Terry Holdren,
National Director,
Kansas Farm Bureau,
Topeka, KS 66612.
                                     
 Prepared Statement of Daryl A. Larson, Farmer and Rancher, McPherson, 
                                   KS

                              June 5, 2007

    Rep. Jerry Moran and the House Agricultural Committee,

    In light of all the complaining from the large livestock and 
poultry producers as well as from some of the food processors and 
retailers about the price of corn and other grain and oil seeds being 
too high, I would like to offer the following suggestion. The powers to 
be in Washington, D.C. need to decide if they want to keep the price of 
agricultural commodities low so that feed and food stays a little lower 
or if they want the agricultural producers to get a fair price from the 
market. Just remember, as you probably already know, that our cost of 
production has increased dramatically because of the increase in price 
of fuel, fertilizer, equipment, insurance, etc. If you choose to try to 
keep the price of commodities low to please the people that are 
complaining, then remember we will have to be subsidized if you want to 
keep us in business so the USA does not become totally dependent on 
foreign countries for our food needs, which would be a horrible 
mistake. If this is the path you choose then I ask that you develop a 
media campaign explaining your actions to the taxpayers of the USA so 
they know it is not the farmers and ranchers that are getting rich from 
the subsidies, but that it is the people that buy and use our 
commodities that are benefiting.

Daryl A. Larson,
  Farmer and Rancher.
                                 ______
                                 
            Prepared Statement of Gary Melander, Assaria, KS
Farm Bill Comments
    Current government farm programs tie subsidy price supports to farm 
production. Additional bushels equal additional subsidies. This 
emphasis on production subsidies ignores the wisdom of the marketplace. 
Farm decisions made on subsidy considerations distort grain markets and 
individual commodity supplies. These subsidies encourage and finance 
excessive application of fertilizers and other crop inputs, the farming 
of fragile lands, and the creation of crop surplus and low commodity 
prices.
    At this point in history, when there is talk of global warming, a 
developing energy crisis, water shortages, and pollution, Americans are 
coming to the reluctant conclusion that our natural resources are 
finite. It is imperative that farm programs encourage resource 
conservation, not resource consumption.
    Tax dollars that have been chasing crop production should be 
shifted into programs that stimulate and support conservation. We need 
to establish resource consumption standards for agriculture. If farmer 
Jones can meet the energy standard, or other critical standards, give 
him a serious subsidy award. When Jones discovers new farm tactics that 
reduce crop inputs while maintaining satisfactory yields, increase the 
subsidy. Give him tax dollars for efforts to protect the land, 
wildlife, and clean air and water. A healthy environment is as critical 
to the good life as is food production. We cannot expect the 
marketplace to recognize and reward this critical conservation work.

Gary Melander,
    Assaria, KS.
                                 ______
                                 
Prepared Statement Don J. Hineman, Wheat Farmer and Cow/Calf Producer, 
                              Dighton, KS
To: Members of the Subcommittee on General Farm Commodities and Risk 
Management
Field Hearing--Salina, KS, June 5, 2007

    My name is Don Hineman and I am a dryland farmer and cow-calf 
producer from Dighton in West Central Kansas. The multi-year drought on 
the High Plains was devastating to my crop production from 2000 through 
2006. Like many of my neighbors, there were several years during that 
period that my net farm income would have been negative had it not been 
for farm program payments. Obviously production-based payments were of 
no benefit to me during this time. It was the direct payment component 
of the farm bill that supported me during those tough times and allowed 
me and most (but not all) of my neighbors to stay in business. I thank 
you for providing that support and I strongly urge you to maintain an 
adequate level of direct payments in the next farm bill.
    As a wheat farmer and beef producer I am very aware of our need to 
export a significant portion of our agricultural production. Therefore 
I am quite hopeful that the new farm bill will be WTO-compliant and 
will not contain provisions that would jeopardize the U.S.' ability to 
export wheat and beef. The truth is that production-based program 
payments do a number of things wrong and do very little right. Such 
payments do not provide a safety net to U.S. producers during times of 
production shortfall, they distort market signals and stimulate 
overproduction of selected crops, and by doing so they have a 
significant negative effect on farmers in other parts of the world 
whose governments are unwilling or unable to play the price support 
game. As an American I worry about the negative sociopolitical 
implications of such a policy and as a Christian I am concerned about 
the humanitarian effects. It is possible to craft a farm bill that 
provides adequate support to U.S. producers without distorting market 
signals and adversely affecting our counterparts in other countries. I 
urge you to search for such a solution by reducing dependence on 
production-based support payments and moving toward direct payments and 
other forms of compensation that would be WTO-compliant.
            Thank you for your consideration,

Don J. Hineman.
                                 ______
                                 
 Prepared Statement of Steven Clanton, Commissioner, Kansas Wheat and 
 Soybean Commissions, Minneapolis, KS; on Behalf of Kansas Association 
               of Wheat Growers; Kansas Wheat Commission
    Dear Honorable Chairman Etheridge and Subcommittee Members,

    I am Steven Clanton. I currently am a Commissioner on the Kansas 
Wheat and Soybean Commissions. I would like to report to you on the 
work to which I was a part. Several Kansas agriculture groups met 
throughout last year to discuss the upcoming farm bill.
    I know this was presented to our Kansas delegation and would like 
to now present it to this Subcommittee.
    Thank you for this opportunity to present this to you.
            Sincerely,

Steven Clanton,
  Minneapolis, KS.

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