[Senate Hearing 110-121]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-121
 
                       NORTHERN PLAINS PRIORITIES 
                         IN THE 2007 FARM BILL 

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

                             FIELD HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION


                               __________

                             APRIL 3, 2007

                               __________

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


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

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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                       TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont            SAXBY CHAMBLISS, Georgia
KENT CONRAD, North Dakota            RICHARD G. LUGAR, Indiana
MAX BAUCUS, Montana                  THAD COCHRAN, Mississippi
BLANCHE L. LINCOLN, Arkansas         MITCH McCONNELL, Kentucky
DEBBIE A. STABENOW, Michigan         PAT ROBERTS, Kansas
E. BENJAMIN NELSON, Nebraska         LINDSEY GRAHAM, South Carolina
KEN SALAZAR, Colorado                NORM COLEMAN, Minnesota
SHERROD BROWN, Ohio                  MICHEAL D. CRAPO, Idaho
ROBERT P. CASEY, Jr., Pennsylvania   JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota             CHARLES E. GRASSLEY, Iowa

                Mark Halverson, Majority Staff Director

                      Robert E. Sturm, Chief Clerk

            Martha Scott Poindexter, Minority Staff Director

                Vernie Hubert, Minority General Counsel

                                  (ii)

  





















                            C O N T E N T S

                              ----------                              
                                                                   Page

Field Hearing(s):

Northern Plains Priorities in the 2007 Farm Bill.................     1

                              ----------                              

                         Tuesday, April 3, 2007
                    STATEMENTS PRESENTED BY SENATORS

Coleman, Hon. Norm Coleman, a U.S. Senator from Minnesota........     4
Conrad, Hon. Kent, a U.S. Senator from North Dakota..............     1
Klobuchar, Hon. Amy Klobuchar, a U.S. Senator from Minnesota.....     5
Pomeroy, Hon. Earl, a U.S. Representative from North Dakota......     7

                                Panel I

Hoeven, Hon. John, Governor, State of North Dakota...............     8

                                Panel II

Johnson, Roger, Commissioner, North Dakota Department of 
  Agriculture....................................................    13

                               Panel III

Carlson, Robert, President, North Dakota Farmers Union...........    22
Hejl, Bill, President, Red River Valley Sugarbeet Growers 
  Association....................................................    27
Hill, Jason, Research Associate, Department of Ecology, Evolution 
  and Behavior, University of Minnesota..........................    33
Iszler, Jocie, on behalf of Mike Clemens, Chairman, North Dakota 
  Renewable Energy Partnership...................................    23
Kramer, Brian, on behalf of Eric Aasmunstad, President, North 
  Dakota Farm Bureau.............................................    31
Martin, Mike, Chairman, North Dakota Grain Growers Association...    25
Thomas, Paul, Director, Northern Pulse Growers Association.......    30
Waslaski, Kevin, President, Northern Canola Growers Association..    29
                              ----------                              

                                APPENDIX

Prepared Statements:
    Coleman, Hon. Norm...........................................    44
    Conrad, Hon. Kent............................................    46
    Pomeroy, Hon. Earl...........................................    50
    Aasmunstad, Eric.............................................    52
    Carlson, Robert..............................................    57
    Clemens, Mike................................................    62
    Hejl, Bill...................................................    64
    Hill, Jason..................................................    67
    Hoeven, Hon. John............................................    69
    Johnson, Roger...............................................    73
    Martin, Mike.................................................    88
    Thomas, Paul.................................................    94
    Waslaski, Kevin..............................................   102
Document(s) Submitted for the Record:
Dakota Resource Council, prepared statement......................   108
Gordon Bischoff, Farmer, prepared statement......................   113
Great Plains Food Bank, prepared statement.......................   114
National Sunflower Association, prepared statement...............   117
North Dakota Association of Soil Conservation Districts, prepared 
  statement......................................................   118
North Dakota Corn Growers, prepared statement....................   120
North Dakota Stockmen's Association, prepared statement..........   121
Northern Great Plains Working Group, prepared statement..........   126
Oilseed Producers, prepared statement............................   129
Rudi Bloomquist, Farmer, prepared statement......................   133
Second Harvest Heartland, prepared statement.....................   134
U.S. Durum Growers Association, prepared statement...............   136
``Positions and Recommendations of the Northern Great Plains 
  Working Groups''...............................................   137



                       NORTHERN PLAINS PRIORITIES



                         IN THE 2007 FARM BILL

                              ----------                              


                         Tuesday, April 3, 2007

                                       U.S. Senate,
                                  Committee on Agriculture,
                                   Nutrition, and Forestry,
                                                          Fargo, ND
    The Committee met, pursuant to notice, at 10:10 a.m., in 
room 201, Fargodome, Hon. Kent Conrad, presiding.
    Present or submitting a statement: Senators Conrad, 
Klobuchar, and Coleman; and Representative Pomeroy.

STATEMENT OF HON. KENT CONRAD, A U.S. SENATOR FROM NORTH DAKOTA

    Senator Conrad. The hearing will come to order. First we 
want to welcome everyone to the field hearing of The Senate 
Agriculture Committee. I want to especially thank the Chairman 
of the Agriculture Committee, Senator Tom Harkin for permitting 
us to have this hearing in Fargo, North Dakota. I want to 
recognize his staff person who is here from the committee, 
Kerri Johannson. Kari, welcome.
    Ms. Johanson. Thank you.
    Senator Conrad. Also representing Senator Chambliss, who is 
the ranking member of the Senate Agriculture Committee, his 
staff person Cameron Bruett. Cameron, welcome, good to have you 
in North Dakota, and we have given you a special North Dakota 
welcome of this weather. We almost never have weather like 
this. Typically it would be 70, 75 degrees.
    Senator Coleman. Except in Minnesota right now.
    Senator Conrad. I also want to very much welcome my 
colleagues, Senator Klobuchar and Senator Coleman. Senator 
Coleman and Senator Klobuchar are on the Agriculture Committee 
in U.S. Senate. We especially appreciate their coming to 
participate in this hearing.
    Also, Congressman Pomeroy who serves on the House 
Agriculture Committee as well as the House Ways and Means 
Committee because as, you know, we have got to write a farm 
bill in both chambers and it is going to be a significant 
challenge and a real opportunity. We want to make certain that 
we are in a position to take advantage of the opportunity.
    I also want to thank the witnesses who have come to be with 
us today. We have lost a couple of our witnesses due to the 
weather but they have been ably replaced by others. I think we 
are only missing one group that was going to be represented 
here today. So we are pleased that most of the witnesses are 
here even though the weather has been not cooperative.
    This is the part of the series of outreach that I have made 
on the Farm Bill. Many of you will recall last year we had an 
agricultural summit right here at the Fargodome. Incredibly 
well attended. We had really the leading agricultural 
policymakers from around the country come and participate in a 
2-day event that was in preparation for the Farm Bill.
    In February I met with all the farm group leaders in 
Bismarck and we had a detailed review of where we are headed 
with the farm bill. That was very helpful.
    Then we have had a series of outreach meetings all across 
the state in town after town, 10 outreach meetings and now an 
official hearing of the Senate Agriculture Committee. We build 
a case for what is important for the next farm bill.
    The message from those meetings I think has been clear and 
consistent. The message has been built on the current farm 
bill. The current farm bill, by and large, is working well. It 
has been especially beneficial to our part of the country, but 
we also know there are areas that need to be improved.
    We need to strengthen crop insurance. I think we all know 
the crop insurance especially does not work well in the quality 
loss provision.
    We also need to do more to take advantage of the 
extraordinary opportunity in energy because we want the country 
to look to the Midwest instead of turning to the Middle East 
for our energy supplies.
    We also have a chance to put in a permanent provision on 
disaster assistance. Very often I am asked well, why do you 
need that? Why can't crop insurance solve that problem? Very 
simply crop insurance is intended for periodic loss, not 
repeated loss. It is like if you had house insurance and your 
house burned down every year, house insurance would not work 
very well. Unfortunately, when you have a drought, very often 
those are sustained. They do not just come and go. And when you 
have loss like that, crop insurance does not work well. So 
while crop insurance is critically important, it is a place 
where we need improvement. It is never going to solve the 
problem of repeated loss from disaster.
    We also I think generally recognize that conservation 
programs need to be improved, especially for our part of the 
country. Do not work very well in our part of the nation. And 
we need to improve the fairness of the commodity programs. I 
was especially disappointed in some of the proposals that had 
come from the Administration with respect to reducing the 
counter-cyclical program and taking that money and giving it to 
cotton. If there is one place that has done very well already 
in terms of commodity programs it is cotton. It would not be, 
to me, the first, second or third place that I would move to 
provide more resources.
    We also face significant challenges, and let me just 
mention a few. I have got a couple of posters here that make 
the point. First is the hostility of parts of the national news 
media. And I would single out the Washington Post. They have 
run a series of stories that I think are unfair, that are 
misleading, that do not capture the reality of American 
production agriculture today and I think they have done an 
enormous disservice to farm and ranch families across the 
country.
    Second, the competition from the European Union. Make no 
mistake they are outgunning us by more than five to one in 
terms of their support of their producers. It is hard to 
believe that the most recent figures show that the European 
Union is providing $277.00 an acre of support per year. Think 
of that. $277.00 an acre of support per year. We are at $48.00 
an acre on an equivalent comparison. So they are outgunning us 
there more than five to one.
    On export subsidy they are outgunning us 87 to one. 87 to 
one. That is not a level playing field. That is not fair. It 
has got to be changed.
    But the EU is not the only culprit. We know that Brazil and 
Argentina and others, China, are gaining unfair market 
advantage by manipulating their currency values and this has 
had a very significant effect. It is a key reason we see Brazil 
now No. 1 in commodity after commodity. Make no mistake, they 
are securing market advantage by manipulating their currency 
value.
    Third major challenge we face are the budget pressures that 
the United States is under. Our debt has grown from $5.8 
trillion in 2001 to an estimated $9 trillion at the end of this 
year. I call it building a wall of debt.
    Unfortunately, this is happening at the worst possible time 
before the baby boomers retire and it is putting very 
significant pressure on all parts of the budget. In order to 
respond to that, we have tried to provide additional resources 
for the Farm Bill by way of a reserve fund. There is $15 
billion in that reserve fund. But the only way it can be 
unlocked is if it is paid for. It has got to have offsets. 
There has got to be someplace else in the budget that we 
provide the resources to offset that money.
    Why is it important to have additional resources for a farm 
bill? Very simply because under the last farm bill, we are $23 
billion below what the estimates were for what it would cost, 
and future funding is based on what you have spent in the past. 
One might disagree with that approach but that is the way it 
works under the Congressional Budget Office scoring of 
legislative proposals.
    So we are in the circumstance where we have $23 billion 
less than we had last time. If we are going to write a 
reasonable farm bill, there is going to have to be some 
additional resources.
    Finally, let me make very clear, agriculture is not 
responsible for our current budget problems. Farm programs 
spend one-half of 1 percent of the United States budget. One-
half of 1 percent. And as I have indicated, we are $23 billion 
below what was anticipated when the last farm bill was written.
    Well, those are challenges, but goodness knows we have 
overcome tough challenges in the past and I am confident we 
will in the future.
    Let me just say I think this hearing is important to 
establish a record that we can take to our colleagues as we 
write the bill about what are the priorities of our part of the 
country, of North Dakota, of Minnesota. What are the things 
that are critically important to us. And that is why I am 
especially pleased that our colleagues from Minnesota come to 
join us, Senator Coleman, Senator Klobuchar. Again, both of 
them are valued members of the Committee.
    And we also are delighted that Congressman Pomeroy is with 
us. I often say there are 435 members of the House of 
Representatives. We have only got one. I am so glad our one is 
Earl Pomeroy.
    We are pleased that all of these members are with us. 
Senator Dorgan sent his regrets. He told me the other day, 
``Kent, I am not going to be able to be there but you will do a 
good job of representing me.'' Of course, Byron and I, as all 
of you know, work very closely together with Congressman 
Pomeroy, so we will convey what we learned here today to him.
    With that I want to call on Senator Coleman for his opening 
remarks. We will then hear from Senator Klobuchar and then 
Congressman Pomeroy, then we will get to our first witness, the 
Governor of North Dakota, Governor Hoeven.
    Senator Coleman.

 STATEMENT OF HON. NORM COLEMAN, A U.S. SENATOR FROM MINNESOTA

    Senator Coleman. Thank you. Mr. Chairman.
    Senator Conrad. And welcome to North Dakota.
    Senator Coleman. Great to be here. These tough North Dakota 
winters. Not like that in Minnesota.
    I want to thank Senator Conrad, thank him for bringing this 
gathering together. The realities, the issues that we face in 
agriculture, they are not North Dakota, as separate from 
Minnesota. We are in this together. And the good news is you 
have got three senators here serving together on the 
Agriculture Committee.
    These issues really, I think, most of the time allows us to 
then put aside partisan divides, and we see so often the 
editorial pages and perhaps on CSPAN, and really figure out 
what is the best thing to do for our growers and producers.
    I associate myself with all that Senator Conrad talked 
about in regard to the Farm Bill and the challenges that we 
face and the opportunities we have. The 2002 Bill is a good 
template and so we start with that. But I just, I want to thank 
Kent. I want to say it is a great pleasure to be here today 
with Governor Hoeven.
    Mr. Chairman, I have a more extensive statement I would 
like entered into the record but let me just briefly highlight 
a couple of things.
    One, farmers should get credit for being fiscally 
responsible. They should not be punished for it. And so my 
concern is that as we look at the Farm Bill and we look at the 
baseline budget that we have, as Senator Conrad talked about, 
this is $23 billion less. The concern that I have as I look at 
that ideas on the table, including those from the 
Administration, is that we have got right now, these are some 
good times in terms of where prices are at and a lot of that is 
fueled by what I think is a wonderful transformation this 
country is undergoing. That is about energy. We have got to 
stop putting techno dollars in the pockets of bums and pirates 
like Chavez. Energy is a national security issue, it is not 
just helping a bunch of Minnesota corn growers or North Dakota 
soy bean growers. This is wheat, canola, this is energy, if it 
is grain it can be converted to energy. We are going to get to 
a point we are going to see this thing go, the sky is the 
limit.
    But the reality is, and we have seen this, let's not forget 
history. This is a 5-year Farm Bill and we may have good years, 
one, two, and three. What happens in the year four? Something 
bad happens. I have been on the floor of this Senate many times 
with Senator Conrad and I got on the floor taking the lead on 
the issue of disaster assistance. He has been out there time 
and again and I stood with him. And we have got to have a long-
term solution to that. We have to have in addition a safety net 
that is there if things change. You can not build a safe net 
and fund it thinking the sky is going to be sunny all the time. 
It may snow in April. So let us understand that.
    The 2002 Farm Bill is a good template. There are still some 
challenges. And I have heard, I have done the same outreach in 
Minnesota that Senator Conrad has done here. We have the same 
thing. Good framework, but we need support adjustments on 
wheat, barley, in particular soy bean farmers, increase in the 
sugar loan rate is important. We have got a zero cost to 
taxpayers sugar program. But there are challenges. NAFTA is a 
challenge out there. And I was not happy with the 
Administration's handling of the Mexican issue last year just 
by discussing some of the prospect of increase supply into this 
country. Prices, all of a sudden, you know, the market is 
impacted. I do believe that in the end we need something to sop 
up or sponge and to sop up any excess sugar coming in, 
potentially may come in from the trade agreements, and that in 
particular. And so we should be looking at a sugar to ethanol 
program.
    Years ago the corn did not get started would get started 
without some support. So that where we are today, we have got 
some support. I just think we need to look to the future so 
that we are not subject to the whims and caprice of all the 
various trade agreements or Administration policy that may 
impact the livelihood, the livelihood, the life blood of folks 
in the shared community.
    I think the good news is that you have got three of us here 
on the Ag Committee. We have got Collin Peterson as Chair on 
the House side. We have got incredibly strong representation 
with Congressman Pomeroy. So I think we are well-positioned. It 
is not a matter of numbers, it is a matter of folks with an 
interest and a commitment, and again the kind of strong 
leadership that Senator Conrad has offered.
    So I am optimistic. We started at a good place but our work 
is not done, and coming here today to listen is really 
important and I certainly appreciate the opportunity to be part 
of this family.
    [The prepared statement of Hon. Norm Coleman can be found 
on page 44 in the appendix.]

 STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you. Thank you, Senator Conrad, 
for having us up here. Nothing would keep us away from the farm 
hearing. Not the Twins home opener.
    Senator Conrad. You know, I am a Baltimore Orioles fan. I 
do not think we will have Senator Klobuchar say much more.
    Senator Klobuchar. Let me proceed. I wanted to just quickly 
introduce to everyone our state director is here walking around 
in the back. Dave Fredrickson, stand up Dave. He is our ag 
person, former head of the National Farmers Union, came out of 
retirement. He said he wanted to work for me but then his wife 
told me she needed to get him out of the house. In any case, we 
are proud to have him on board.
    We are also opening a Moorhead office in the next few weeks 
and Andy Martin is currently working for Collin Peterson in 
Washington is coming over to head that up so that will make it 
even an easier job for us to work with all when we come up to 
northwestern Minnesota and to North Dakota.
    I am going to echo the comments of my colleagues. I first 
wanted to thank Senator Conrad for the work that he did on the 
bill. You can not imagine the effort he had to put in day in 
and day out. This is a national project where he made sure that 
the farmers in North Dakota and Minnesota were up front and 
center. He provided $50 billion in additional money for farm 
programs without raising the deficit.
    Those of you in North Dakota should be thanking him for 
that every day.
    I am concerned about the potential for details of the bill 
that are coming out that include disaster relief, including a 
recent bill we just voted on last week that includes disaster 
relief. It is noted the farm bill saved $25 billion rounded up 
from $23 billion. If you saved that much money, certainly there 
should be some money left for some disaster relief for our 
farmers in the upper Midwest, and I am going to continue to 
fight for that every single day when I am in the Senate.
    Other priorities for me include the continuation of the 
MILC program, the strong sugar program, I think I said up here, 
Mark, when I was here a few months ago we need sugar in the 
morning, sugar in the evening, sugar at the supper time. And we 
make sure--you have used that line.
    We have to make sure that we keep a strong sugar program. I 
am concerned about the sugar coming in from other countries. I 
am concerned about some of the suggestions that have been made 
and you can not let the sugar beet producers in the Red River 
Valley take a back seat to subsidized foreign imports.
    With renewable fuels and, I am not only on the Agriculture 
Committee but also on the Environment and Public Works 
Committee and the Commerce Committee and all these committees 
have some jurisdiction over energy issues and I would like to 
see expansion of our corn ethanol and soy beans but also 
looking at the other biofuels. That is what I am making sure 
there are things in there to promote cellulose, ethanol and 
next step is switchgrass. There is an interest in that now not 
only from farm States but also from States across the country 
who are considering the farm exchange issue.
    As Senator Conrad mentioned, the issues in our State and 
North Dakota is getting that CSP money and getting that CRP 
money. So many applications turned down. We have to refine 
those programs and focus them on things that are going to 
matter to this country. One of them, too, is growing 
switchgrass and prairie grass on marginal farmland.
    What we are going with E85 pumps? As you know there are 
something only over a thousand E85 pumps in this country. The 
last I looked there were 25 in North Dakota. Governor, you have 
updated statistics on that. And about 300, little over 300 in 
Minnesota. If we are going to expand renewable fuel, we are 
going to expand it across the country, we need to have the 
pumps. That is why we are working with Senator Harkin and 
others to try to get some money in for the Farm Bill so we can 
build that infrastructures that these fuels are available all 
across this country.
    Thank you for having me.
    Senator Conrad. Thank you, Senator Klobuchar.
    Now Congressman Pomeroy, and thank you so much for being 
here. Thanks so much for all of your leadership on the farm 
challenges and opportunities. Nobody has been more aggressive 
on behalf of our part of the country than Congressman Pomeroy.

  STATEMENT OF HON. EARL POMEROY, A U.S. REPRESENTATIVE FROM 
                          NORTH DAKOTA

    Mr. Pomeroy. Senator Conrad, thank you and thank you very 
much for allowing me to participate with three members of the 
Senate Agricultural Committee. I noticed this morning's 
discussion represents bipartisan cooperation, bicameral 
cooperation, cooperation across the State lines to pull 
together on the new farm bill.
    Bipartisan cooperation, I flew over in the Governor's 
airplane. I appreciate that, Governor.
    Senator Conrad. Did the Governor get to fly, too?
    Mr. Pomeroy. We talked about whatever the Governor wanted 
to talk about.
    Senator Coleman, great to have you on the panel. Whatever 
partisan differences we might have, we are building a safety 
net for farmers. It is my friend to the west, Collin Peterson 
who is chairing the House Agricultural Committee. It has been a 
long time since the northern plains led the House Agriculture 
Committee. Typically we have not had an opportunity to restore 
some to this farm bill. To me the core feature of the farm bill 
is price protection for farmers, insuring that family farms are 
the backbone of food production in our country. Farmers can not 
control what the farms are going to do. So this management 
assistance through the Federal Farm Bill has been a critical 
element of the farm policy. Crop insurance and disaster 
payments are there in case production fails which again is 
something beyond the reach of what a farmer can control.
    So I think we need to keep that in mind, especially in an 
attempt to recover cyclical price protection as a core item on 
this farm bill. There are a number of other titles, but it is 
going to require a lot of effort.
    We did get a budget allocation that I think will allow us 
to continue the existing farm bill. As work on these other 
titles such as conservation, rural development, research and 
energy, we need to remember that each of these titles offer 
really important elements to this farm bill package. We will 
have to figure out how to do it.
    This budget is going to come out of the Senate under 
Senator Conrad's leadership as the chair and out of the House 
under the leadership of the House Budget Chair. It gives us a 
fair shot to get the funding. But you can not make a shirt out 
of a handkerchief. We have got a lot on the line whether or not 
we are going to get an allocation. So now we need to pull 
together.
    The disaster coverage, just a final note on that. We are 
able to reverse the previous policy and get the disaster 
funding committed in the House in the supplemental 
appropriation bill. In the past the Senate has, on a bipartisan 
basis, shown strong support for the disaster support for 
agriculture. Now we have got the House's support as well. The 
disaster bill has got some controversy ahead of it. I hope for 
joint resolve in the House and Senate and in both parties for 
the disaster program for farmers to have a chance of seeing 
this passed. I think we have got a 60/40 maybe even better than 
that of making sure we have the disaster payment flowing, and 
build it very importantly without the caps, which means you do 
not have to get all the sign ups and then allocate and pro rate 
the amount and accelerate the ultimate flowing of relief much 
more, by a matter of months.
    So if we can hold what we pass, House and Senate, we are 
well on the way to getting relief.
    Again that concludes my comments. Thank you very much for 
allowing me to be here.
    Senator Conrad. Thank you very much, Congressman Pomeroy.
    I think we should say on disaster relief, there was an 
attempt the take it out of the Senate package last week and we 
were able to defeat that move on a vote of 73 to 24. That was 
an overwhelming vote and I think that sent a very strong 
message and a hopeful one as well.
    Now we are going to turn on our witnesses. I want to again 
thank Governor Hoeven for being here. Very much appreciate, 
with the legislature in session, his coming to Fargo to be part 
of this hearing and to be our lead witness.
    Governor Hoeven, we have worked very closely on disaster 
aid and previous farm legislation. Thank you and please proceed 
with your testimony.

 STATEMENT OF HON. JOHN HOEVEN, GOVERNOR, STATE OF NORTH DAKOTA

    Governor Hoeven. Thank you, Senator Conrad. And thank you 
for holding this field hearing.
    Welcome to you, of course, and also to Senator Coleman, 
Senator Klobuchar. Thank you for being here.
    And Congressman Pomeroy, did have a good ride over together 
so we talked about some farm policy on the way.
    I know some folks may see this as, snow storm as a bit of a 
problem or challenge here in North Dakota. It is no problem out 
west. We really appreciate the moisture. So it is great in that 
sense. We are trying to keep an eye on the Red River in the 
valley with the flooding problems.
    But again I want to welcome all of you, and also farm 
leaders from around North Dakota and probably South Dakota as 
well. Appreciate you being here and put the input to the Ag 
Committee on what is going to be an extremely important piece 
of legislation not just for farmers and ranchers but for our 
country.
    When we think about it, good farm policy is not just about 
our farmers and ranchers or producers throughout the heartland 
of America, throughout rural America, this is something that 
benefits every single American, every single American whether 
you live on the east coast or the west coast in a large city, 
small community, wherefore you live.
    Americans benefit from the highest quality, lowest cost 
food supply, safe, dependable food supply in the world in the 
history of the world. So we talk about writing a farm policy 
and allocating resources to a good farm policy, there is 
something that benefits every single American and it is 
important we do not lose sight of that.
    And as the discussion goes on in Washington, DC or New York 
City or Los Angeles or out here in the heartland, we have to 
remember this is about something that benefits every American 
of every age, and it is a sound investment in our farmers and 
ranchers, in rural America, in our country and in each of our 
countries. So again I appreciate being honored with testimony 
you get from farmers and ranchers from the associations that 
represent them is very important and we appreciate that.
    North Dakota is the leading producer of 12 major 
commodities. That includes things like spring wheat, durum, 
barley, oats, dry edible beans, flax, dry peas, lentils, 
sunflowers and canola and others. We are No. 1 in those. We are 
second and third in many other crops. Some of them you 
mentioned like sugar. We do get out every year with California 
to be No. 1 in honey. Soy beans, corn and many other products. 
The reality is we are part of the bread basket of America that 
feeds this nation and, to a large degree, helps feed the world 
and so this farm policy is extremely important.
    There are six or seven what I think are very key components 
to the farm bill, and I will touch on them briefly. I do have 
written testimony which I will submit for the record. I will 
paraphrase those comments. I will try to be respectful of 
keeping it within five or 6 minutes. I know there are people 
that are going to give very good testimony. I want to be 
respectful of their time as well.
    Those six or seven items I will list off and then I will 
touch on a couple of them in a little bit more detail. It is my 
belief that a bill is built on the success of the existing farm 
bill, and I remember you had a hearing out here six or 7 years 
ago and we went through this process. You know, really the Farm 
Bill that was put together in 2001 and 2002, in many respects, 
was a successful and effective farm bill. We talked about some 
of the numbers and the cost effectiveness of it. But some of 
the principles like the counter-cyclical safety net are vital 
in this next farm bill and we need to build on that success in 
this farm bill. It needs to be a long-term farm bill so our 
producers can plan for the future so that young people can get 
in the business of farming and make commitments and make sure 
they are able to carry through on those commitments and build a 
way of life in agriculture.
    We need to have planting flexibility so that our farmers 
and ranchers can produce for the market. That is not only 
important in terms of them generating income that is making 
sure that they are responsive to the needs, whether it is food, 
fuel or fiber, that they are meeting those market needs.
    Two of the things I think are the counter-cyclical safety 
net. We need to build on that. I think there are some 
adjustments that need to be made in making sure all commodities 
get a fair pricing structure under that counter-cyclical safety 
net.
    Senator Conrad. You want more money for cotton?
    Governor Hoeven. No.
    Senator Conrad. I just wanted to get that in.
    Governor Hoeven. And those are some of the adjustments that 
need to be made and can be made that I think can work well for 
the entire country.
    But in conjunction with that counter-cyclical safety net, 
we need better risk management safety tools. Absolutely vital 
in this farm bill that we coordinate crop insurance and/or a 
disaster title with that counter-cyclical safety net. Paramount 
importance. If there is one point that I can impress upon you 
today, we have got to have good risk management tools that are 
coordinated with the counter-cyclical safety net.
    Now USDA has, the Administration has put forward the 
concept of gap insurance that would work in tandem with crop 
insurance which, as you know, is a separate law. That is a 
concept that could perhaps work but USDA and Congress have got 
to make sure that they are working with our producers and the 
farm associations to make sure that if we are going to use that 
gap insurance coverage product that it works, that it is priced 
reasonably and fairly and it provides the kind of revenue 
coverage to make sure there is protection there both for 
quality and quantity losses so that when we have a natural 
disaster that farmers do not go backward. Think about it. Any 
other business you can think of the business person insures 
against risk so if they suffer a natural disaster of whatever 
kind or they have a fire or any kind of calamity, that 
insurance makes sure that they stay whole. They do not go 
backwards 30 percent that year or 40 percent that year or even 
20 percent that year. The concept is that insurance is there to 
bring them back to whole so they can stay in business.
    Contrast that with crop insurance where our producers go 
back 20, 30, 40 percent if they have a disaster, then if they 
can hang in there the next year their APH, their annual 
production history is lower so they get less coverage. What 
kind of a system is that? It needs to be addressed, so either 
to be addressed through this gap insurance product, if it is 
done right, and our producers have got to be involved in making 
sure that works and that it is reasonably priced so it works to 
properly insure in tandem with normal crop insurance or you 
have got to have disaster title so we are not in the situation 
of seeking ad hoc disaster bills like we have this year and 
very much need to get that done.
    I know you are working hard on it but we need to get that 
done.
    We need to have that kind of a program in place, proper 
risk management for producers so year in and year out they 
successfully in the business of farming and ranching.
    We need a good conservation title. Our farmers and ranchers 
are a good stewards of the land, they have a good track record. 
The conservation title needs to be a common sense approach that 
works for farmers ranchers out of the ground. We have got to 
avoid some of the red tape and bureaucratic challenges we have 
had in the past. So it is important but it is important that it 
be done right.
    We need to provide more help for the value added 
agriculture. The capital requirements for value added 
agriculture are so high we need to look at those programs and 
need to increase the assistance we provide to the producers to 
get involved in those businesses in terms of helping them with 
the investment and with the capital requirements that go to 
developing those value added projects. That can be a huge 
success story for rural America, not only in terms of more 
income for farmers but in terms of jobs in rural America. We 
need more with value added.
    Then the energy. We are talking about renewable energy that 
is good for our economy. It is good for our environment. It is 
good for national security. Already farmers in the area of 
renewable energy farming are making huge differences. There is 
so much more we can do, biofuels, well, cellulosic, whether it 
is biomass, that is the future. We are going there. That needs 
to be a huge part of this Farm Bill.
    Again, I will wrap up here. I think those are certainly key 
components that need to be in this farm bill. Senator Conrad 
and I discussed the fact. I know you are focused on those and I 
believe we have an opportunity. I think this can be a very good 
positive, very cost effective products for the nation. Has a 
tremendously positive impact on the future of our country.
    Thanks again for holding this field hearing.
    [The prepared statement of Hon. John Hoeven can be found on 
page 69 in the appendix.]
    Senator Conrad. Governor, thank you very much for your 
testimony. You know I think you can tell from my opening 
statement the Governor's testimony, we are very closely aligned 
on these issues, and it has kept us, very important for our 
State. I very much appreciate your taking the time to be here 
and be our key witness.
    Let me just say to my colleagues on the Committee, 
typically out of the respect to the office and respect for the 
person of the Governor, we do not subject the Governor to 
questioning but if somebody wanted to make a comment or discuss 
with the Governor in some way his testimony, that would 
certainly be appropriate.
    Senator Coleman, anything?
    Senator Coleman. I would note. I will note there is a 
division here and perhaps there is no question its cyclical 
programs, conservation and energy, energy. What I would 
suggest, raise the issue, is these are regional issues. I would 
hope that on a State to State level as we look at some of the 
research cellulosity, research in to, in addition, North Dakota 
does things that Minnesota does not do in terms of some of the 
research they are doing with coal sequestration. They are 
looking into Minnesota, not farm but the energy issue of coal 
gasification. I would hope that we would with our state 
university that we would look at that since we are on the 
cutting edge of some of the energy issues and conservation that 
we have some interests there and we have got to get to 
cellulosity quickly. I see ethanol plants in Kittson County on 
grass seed. But there are ways we can use our research 
facilities to find them I think it would be helpful.
    Governor Hoeven. Absolutely. And our future in energy 
between North Dakota and Minnesota is closely aligned. We are 
huge energy producers in the state and we need each other. We 
are already working on those things and need to do more.
    Senator Coleman. Thank you.
    Senator Conrad. Senator Klobuchar.
    Senator Klobuchar. I appreciate what you said about the 
Farm Bill that has a safety net and I'm terribly concerned some 
of the members well we are here. I do say that in North Dakota 
things happen and very definite. I appreciate what you said.
    Also, I want to follow up on some of the situations of crop 
insurance and proposals and I want to say way that they have 
figured the offers and look at so that there is county wide 
offers and I know this is a concern of farmers. That is one of 
the things we are looking at improvement under the projection 
and, of course, I appreciate what you said about disaster aid 
and help Senator Conrad and Coleman.
    Senator Conrad. Congressman Pomeroy.
    Mr. Pomeroy. My transportation Governor, I felt his 
testimony was absolutely compelling. Absolutely.
    With the Farm Bill, during the time I have been there, we 
guarantee payments versus risk management. We come down on the 
side of risk management. Senator Coleman share this, I think we 
share a vision on this price protection. Again we want price 
protection as the core of the Farm Bill and that certainly 
means more help to farmers.
    Senator Conrad. Governor, I noted that you have never given 
me a ride on your plane.
    Governor Hoeven. I'd like to extend that offer to you then.
    Senator Conrad. OK. That will be accepted.
    Governor Hoeven. As well your fellow senators. It is 
beautiful, it is white. The wind is blowing a little.
    Senator Conrad. Clear skies.
    Any final thoughts, Governor you would like to share for 
the record?
    Governor Hoeven. Again, I think we really are building on a 
farm bill that has significant success and so if we can take 
the things that work, make some adjustments to improve them and 
add these other elements that we have emphasized here today, we 
can have a very good farm bill and I think very important that 
have to keep sight of in this discussion for you, all of us, we 
need to make sure as we discuss it around the country we 
emphasize its importance to each and every American, every 
single American benefits from this farm bill.
    Senator Conrad. I hope the Washington Post is listening. 
You know, really I must say I have never been so disturbed by a 
reporting by a national publication as the Washington Post on 
the Farm Bill. I just think they have misled their readers to 
suggest that all the support is going to rich farmers, and then 
they talk about people earning $250,000 to $500,000 a year and 
they never indicate that that is gross income. Made it look as 
though that is people's net income. They never indicate that 
all the expenses have to come out of that, you know, all the 
land expense, all the operating expenses, all the living 
expenses, you know, they make it look like these are people who 
are walking away with $500,000 in their pocket. We know that is 
not true. I think that does an incredible disservice to present 
farm policy in that way.
    Again, thank you, Governor, thank you very much for coming 
here and providing your testimony and we look forward to 
working with you in the days and weeks ahead as we try to write 
a strong farm bill for this country and for this region and 
especially for our State of North Dakota. Thank you, Governor.
    Next we'll call to the witness stand Roger Johnson, 
Commissioner of Agriculture of North Dakota. Commissioner 
Johnson has been selected by his colleagues as the head of all 
agriculture commissioners in the country at this critical time. 
When we wrote the last farm bill, Mr. Johnson had been selected 
by his colleagues to be their leader on writing a new farm 
bill. I can say without hesitation, Mr. Johnson played one of 
the most constructive roles in the writing of the last farm 
bill. I spent hours and hours and hours with Commissioner 
Johnson on how we would first write the last farm bill and how 
we would negotiate it and he played just a pivotal role and I 
think that is why the commissioners have chosen him to be their 
leader as we go into this farm debate. So welcome, good to have 
you here and please proceed with your testimony.

    STATEMENT OF ROGER JOHNSON, COMMISSIONER, NORTH DAKOTA 
                   DEPARTMENT OF AGRICULTURE

    Mr. Johnson. Thank you very much, Senator Conrad, for those 
kind remarks. It has certainly been a pleasure over the years 
to have the opportunity to work with you and our delegation and 
our friends across the river in doing public policy that is 
important and good for family farmers and for all of us. As the 
Governor I think so aptly put it, this farm policy is not about 
farmers, it is about all of us as Americans.
    My comments are fairly extensive so with your permission, I 
am going to kind of skip around and summarize them a bit and 
hit just a few high points. They are a compilation of obviously 
all things that I believe, but much of what I am about to say 
is also contained in our national association farm bill 
proposal which we had the honor of presenting you with, 
Chairman Conrad, last week, I think, when we were out in 
Washington D.C.
    Those recommendations number something over 200, very 
specific recommendations and they are available on the web and 
will be made available hopefully to begin the task of writing 
this Farm Bill. The highlight of those recommendations are also 
attached to my testimony and I would be remiss if I did not 
begin by also saying thank you for the hard work that you and 
everyone on this panel have done in passing ad hoc disaster 
relief. I know it is not law yet, but certainly this is the 
furthest it has come in a long, long time.
    At the heart of my testimony is really going to be talking 
about permanent disaster relief, and I will get to that in just 
a moment. This singular event of getting ad hoc disaster 
assistance passed and the length of time in which it took to 
get it passed and tenacity with which you had to continue to 
work to get it passed underscores more than anything else the 
need for having a permanent disaster title.
    In terms of background, you already heard a lot of the 
background from the Governor. Agriculture is the No. 1 sector 
in North Dakota's economy. Over $4.7 billion in cash receipts 
annually. We lead the Nation in the production of 14 different 
commodities. We have got 30,000 farmers and ranchers in our 
state. We are also an energy state, as Senator Coleman talked 
about with respect to coal. In this energy business is 
providing an enormous opportunity for us in agriculture this 
time around with this particular Farm Bill.
    In North Dakota right now we have four operating ethanol 
plants. I know it is small by comparison to our neighbors 
across the river, 135 million gallons of annual production, but 
we have got another 300 million gallons scheduled to come 
online. When that happens we will be very close to 100 percent 
of our current corn production converting into ethanol. 
Dramatic changes are in store here.
    The same thing can be said about bio diesel and other kinds 
of renewable fuels. There is an enormous potential for biomass 
production, and I certainly endorse all the suggestions about 
cellulosic ethanol and the need to significantly wrap up 
research and developed efforts in that arena. That is an area 
where North Dakota again would be able to see significant 
success and we lead the Nation in the production, in the 
potential to produce perennial energy crops.
    But as has been said, what undergirds everything in this 
Farm Bill in my judgment is a solid safety net. The cyclical 
programs, the marketing loan programs have performed quite 
well. It certainly needs to be rebalanced as has been discussed 
and clearly this feature of the Farm Bill has been directly 
responsible for this Farm Bill saving taxpayers the $23 billion 
that has already been talked about. It needs to be continued 
and improved. We are all coping with the higher prices that we 
currently are facing in agriculture but I think all of us in 
this room would also recognize that when prices go up, prices 
can go down and we had that experience once before, not with 
the current Farm Bill but with the prior Farm Bill where lots 
of folks were saying we had high prices structure we were 
facing in 1996 is going to be here for as long as far as the 
eye can see and it did not last 2 years before we were in the 
depths of trying to deal with ad hoc disaster assistance in a 
whole new area.
    Economic assistance, we need to make sure that we maintain 
and that we improve this safety net in the upcoming Farm Bill. 
One reason we need to bring the lower prices and target prices 
higher.
    In my testimony, I give you a table that shows some of the 
cost increases, just two of them, fuel and fertilizer costs 
alone over the last 3 year period have gone up by 85 and 79 
percent respectively. You can not farm and sell commodities for 
the same prices that you did in 2002 with the kind of 
escalating cost structures that family farmers and ranchers are 
faced with.
    I do want to suggest that because of the hard work, 
Chairman Conrad, that you have done on the Budget Committee, 
you understand probably more than anybody else in this room how 
difficult it is going to be to put all the features and 
everything that everyone is talking about in the Farm Bill 
inside the confines of the budget constraints that you have.
    So let me offer a suggestion, and there are not a lot of 
folks, I think, who have made this suggestion quite as directly 
as I am making. The direct payment feature which is the remnant 
of the old Freedom to Farm Bill is a significant part of the 
current Farm Bill in terms of cost and is in fact one of the 
parts that the Administration has proposed to increase. I, in 
fact, would propose the opposite. I think it ought to be 
significantly decreased and the money savings from those 
features should be used to bring the safety net higher and put 
in place a permanent disaster title for the Farm Bill.
    Let me just refer to this chart. I only did one for you, 
Senator Conrad. I know how much you enjoy charts, and I tried 
to make sure that this was in color and everything. It is a 
very, very important thing about how a permanent disaster title 
should be configured.
    Senator Conrad. Can I just say, you know, I do not like 
that rust color.
    Mr. Johnson. For the record, I think it is red.
    Let me explain what this rust color is. First of all, the 
bottom, these are three different scenarios of levels of crop 
insurance that would be provided on a mythical farm, if you 
will, or sample farm, and so the bottom chunk is the revenue 
that would be received from the crop sales in the event that we 
suffered a 50 percent production loss, so that is constant in 
all three scenarios.
    At the lower level of insurance, the first rust colored bar 
is the insurance indemnity payment that comes if you carry 65 
percent coverage and on the far one 75 percent. Obviously your 
indemnity payment will be higher if you carry a higher level of 
protection.
    But the next chunk is something that everybody talks about 
but I do not know that I have ever really seen sort of 
described in some sort of detail, and there is a lot of detail 
that we put together, Senator Conrad, Scott Stofferahn with 
your staff and folks from FSA, from risk management, from the 
insurance industry and others is to develop this proposal.
    The green chunk would be the payment received under a 
permanent disaster title as we are proposing it. And what is 
noteworthy about it is it is always just a little bit less than 
what total income would have been had there been a normal crop, 
which I think is appropriate because actually in a different 
scenario get right up to the top of that, which would be 
appropriate. But what is most important about this is that this 
system does not in any way undermine crop insurance, and in 
fact it does the opposite, it encourages folks to get higher 
and higher levels of crop insurance, which is precisely what we 
want them to do because in the long term that, of course, will 
reduce government exposure.
    Senator Conrad. That is critical. We can not undermine crop 
insurance. We are all committed to crop insurance, we are all 
committed to providing incentives to crop insurance. How does 
this encourage people to continue and even buy enough?
    Mr. Johnson. What it does is we developed a factor that is 
based, I think we base it on everybody is carrying 65 percent 
level of crop insurance. You can arbitrarily pick whatever 
level you want. If people carry more than that, the factor is 
more than one. If people carry a lower level, than that base 
level and the factor would be less than one. And that factor is 
applied to the level of the loss, the actual loss that is 
incurred and that thereby means that your disaster payment is 
going to be a little smaller than the 65 percent level of 
coverage than it will be if you carry 70 percent level of 
coverage and it will be a little larger still if you carry a 
higher level of coverage. I think that is the critically 
important feature of how disaster assistance ought to be 
structured.
    Let me take this moment to say that it is this kind of a 
deliberative approach that I would encourage the committees to 
take as you write this permanent disaster title unlike trying 
to get ad hoc disaster assistance where you have to put 
together a coalition, and we all understand that. We may have 
an enormous disaster in the upper Great Plains but without 
hurricanes someplace or the red tide in the far east or forest 
fires in the west or whatever, you just can not often assemble 
enough of a coalition to get something passed. So this sort of 
deliberate exposure is something I think is, it is just 
something I hope you will spend some time and give serious 
consideration to.
    There are a lot of other provisions, recommendations that 
are provided in my testimony. I am going to skip through a lot 
of those because I know that time is getting away from us.
    Let me say a word about payment limitations because I 
think, too, the headlines, Senator Conrad, that you talked 
about before that are so prevalent on the east coast 
newspapers, in particular, I think foretell the future of farm 
programs if we do not get a handle on how some of those 
benefits are disbursed, and frankly the language that we have 
in the Farm Bill dealing with payment limitations is twofold 
and it needs to be tightened up.
    My fellow Ag commissioners actually agree with me for the 
first time ever in all the years we have spent talking about 
farm policy, this north/south divide, and southerners, as you 
know, never want to talk about payment limitations, most of us 
up here support them.
    The single recommendation that we would make is you need to 
eliminate the three entity rule, you need to tighten up the 
provisions, you need to pull all benefits in under the 
limitation so the limitation, whatever it is, whatever level 
you establish it at, is a credible limitation so people can not 
just sort of get around it at will. That, in my judgment, is so 
important if we are going to restore public confidence in farm 
programs so that is one recommendation I would make.
    I spent a lot of time in my testimony talking about 
renewable energy and some of the opportunities but in the 
interest of time I am just going to suggest that hopefully you 
are all, everybody is talking about energy in this next Farm 
Bill and I think that we all see this opportunity that really 
has not been here for a long, long time. We have some real 
prosperity in agriculture. We need to do that by making sure we 
have got a safety net and do the right things in the other 
areas I recommended.
    Finally, let me suggest that in the area of livestock I 
would hope that country of origin labeling is something that 
remains in the Farm Bill, hopefully is implemented very soon. 
That I would argue that a livestock indemnity program needs to 
be part of the permanent disaster program as well.
    Finally, I know that everybody at the table here has been 
supportive of removing the ban on interstate shipment of state 
inspected meat products. I hope that that, certainly is a high 
priority with my fellow commissioners across the country and I 
hope you would do that.
    In addition, I have not talked a lot about conservation 
programs or the nutrition title. Those are both just enormously 
important, as you know, but in the interest of time let me just 
quit there and hope that if there is a single message that I am 
able to leave is the safety net is important, enormously 
important part of the safety net in my judgment is doing 
something with a permanent disaster title.
    I would be happy to respond to any questions.
    [The prepared statement of Mr. Johnson can be found on page 
73 in the appendix.]
    Senator Conrad. First of all, Mr. Johnson, once again for 
acceptance of your testimony and extraordinary effort and 
energy you put into your recommendations.
    Let me say to you I appreciate you recognizing the budget 
pressures. I know there are people in farm country who expected 
when I became Budget Committee Chairman that I was just able to 
wave a magic wand and provide whatever resources people thought 
they might like to have in a Farm Bill. You know, as much as I 
might like to do that, I cannot do that. I cannot just write a 
blank check. I cannot write a blank check for any part of the 
budget because the truth is we are in very serious financial 
straits. We added over $500 billion of debt last year. We are 
going to add another $500 billion to the debt this year. This 
is before the baby boomers retire. I can not be writing blank 
checks for any part of the budget and I hope people appreciate 
that.
    We did provide the additional $15 billion but it has to be 
paid for and, you know, I do not minimize the difficulty of 
doing that. I also know there are places it can be done and I 
have told my colleagues, I have given them some ideas where we 
might do it.
    But it is critically important we be fiscally responsible. 
I mean, this is, you know, agriculture has got to set a good 
example, and the rest of the budget has got to be much more 
serious about what we are doing in terms of spending peoples' 
money. So I appreciate your recognition of that.
    Let me turn to Senator Coleman for questions he might have.
    Senator Coleman. Thank you. Thank the Chair.
    There are two areas I want to follow up on the energy. I 
know you have written testimony and some of it you have gone 
through. I want to support with you, we are talking about the 
energy opportunities but there are some challenges. One of them 
you talked about in your testimony is there is a reality. We 
have got corn, you testified, we have got CRP land and 
conservation. But we reached the point and possibly continue to 
make that point it has to be economically beneficial to some of 
our farmers to take the penalty, take the land out of CRP and 
plant corn.
    So the question becomes how can we allow the use of lands 
for CRP and at the same time biofuels, particularly as Senator 
Klobuchar talked about the switchgrass, and there are some 
opportunities. In your testimony you talked about support the 
use of conservation reserve program lands for the production of 
energy and biobased crops with commensurate payment reductions. 
You talk a little bit more about that. You see a future in 
which particularly we get to cellulosity. That we can maintain 
the conservation and maintain the CRP lands and at the same 
time allow growers to be able to benefit from some of the 
biofuel opportunities.
    Mr. Johnson. Senator Coleman, there are two specific 
recommendations dealing with that question. One says to take 
portions of CRP and use them for cellulosic energy as you have 
aptly described. Another one is think about even creating a new 
program for CRP, like program that says, you know, let's 
encourage some of these, some of these farmers to put land into 
permanent vegetative cover and use that product for cellulosic 
energy. We are faced with a very difficult dilemma here in that 
we do not have any cellulosic energy production yet happening 
in this State or region and it is kind of a chicken and egg 
issue.
    One of the world's leading cellulosic ethanol producers 
that told me repeatedly the single most important thing we can 
to do encourage them to build cellulosic ethanol plants is to 
demonstrate that we can grow and can find enough geographical 
area, enough perennial vegetation to feed a plant. It is an 
enormously important issue because this cellulose is basically 
dried up hay and that is about the way it will haul. It is 
going to be difficult to transport so you have to do it in a 
confined area. And so that is what those recommendations are 
trying to do. They are trying to get ahead of the curve and say 
let's design some programs to encourage folks to grow these 
crops even though we do not have an ethanol or cellulosic 
energy plant yet here and see if we can't attract them.
    Senator Coleman. You think it is important we do not pitt 
our energy needs against somehow being a conflict without 
resolution of our conservation needs?
    Mr. Johnson. I could not agree more. Here is one of the 
challenges that you have as policymakers. It is very true what 
you just said. There are folks who have CRP lands that if we do 
not provide the kinds of opportunities we have just been 
talking about, they are going to take the land out of CRP and 
put it in corn. Much of that land probably should not be in 
corn. Much of that land is more fragile land and just probably 
should not be used for that reason, so you could legitimately 
use it for perennial crop production.
    It is certainly a better conservation use of the land, and 
those kinds of things I think benefit everyone in the 
conservation community as well as the energy, security issue 
that everyone talks about.
    In my judgment it is very important, we do not want to 
just, I know there are those arguing just get rid of CRP 
because we have got $4.00 corn and these high prices are going 
to be here forever. That would be exactly the wrong direction 
to go in my judgment. We need to be mindful of conservation 
needs. We need to be encouraging the industry to get on with 
the development of cellulose.
    Senator Coleman. Certainly conservation programs allow the 
farmers to work in concert with folks concerned about habitat.
    One other line of inquiry. Again this issue of opportunity 
that is created by energy but at the same time presents some 
conflicts. You talk to some of the local ownership. The reality 
is that Wall Street is involved in energy. There is money to be 
made. There is a hassle out there. To maximize that, that is a 
good thing, but we all know that money that is kept in the 
community, spent in the community, there is a value added for 
that, tremendous value added. Do you have any thoughts on how 
we can maintain some aspect of local ownership to keep money in 
the community as we welcome, you know, the influx of capital 
into the ethanol, soybean biofuel, cellulosity?
    Mr. Johnson. Senator, some of the recommendations that we 
provide in detail in the documents do precisely that. They talk 
about tax incentives, for example, that can be used by 
individuals to set up large companies as ways of attracting 
local ownership and there are other recommendations that are as 
well.
    But you are so right that having local ownership is so 
important to these local communities. It is not to say we do 
not all celebrate when we get a big energy company coming in 
and developing the industry. But the economic multiplier effect 
is so much larger if you have local ownership, and so I would 
be happy to share all those recommendations with you.
    Senator Coleman. You have given my one possibility, that 35 
billion fuel standard. Possibility of setting aside a 
percentage X billion gallons to be locally owned.
    Mr. Johnson. Sure. Sure.
    Senator Coleman. That something you looked at.
    Mr. Johnson. That would be a good example of one of the 
things we talked about.
    Senator Coleman. Love to support that.
    Senator Conrad. Senator Klobuchar.
    Senator Klobuchar. Thank you. Thank you, Commissioner 
Johnson. Appreciated your comments on the country of origin, 
and I just think that we should be talking about not where is 
the beef but where is the beef from and that has been, to me 
when I looked at this I now understand that this has just been 
a delay in implementation. I think just as much will help 
Minnesota and North Dakota.
    Can you expand a little bit on the issue in terms of how 
you think you can push this, what is in store from your 
perspective?
    Mr. Johnson. Well, I think we simply need to send a strong 
message to the Administration that we want to get more energy. 
Everybody knows the reason it keeps getting pushed back is 
there has been pressure and in the form of Congress as well 
there was just folks got along and said well, just do not write 
it another year, another 2 years, another 3 years and here we 
are, another 2 years.
    I think the America people, surveys have shown, 
overwhelmingly in the 80 plus percentile want to know where 
their beef is coming from. I think it is such an important 
issue we just frankly need to have the will to do it, the 
political will to do it, so I guess I would turn that question 
back to you as policymakers in Congress to simply do not delay 
it any longer. Insist that the law that was passed as part of 
the Farm Bill that we currently operate under gets implemented 
before the Farm Bill expires.
    Senator Klobuchar. Very good. Last question is just to 
follow up on some of your charts here on the disaster payments 
and then the relationship with the crop insurance. I talked to 
the Governor about some of the Administration proposals that 
how they had gotten lost. Can you talk a little bit about that, 
better do it on individual basis or what you see in North 
Dakota?
    Mr. Johnson. Absolutely. This feature works on an 
individual farm basis and it is based on total revenue on that 
farm. This example is far too simplified to really capture what 
happens in the real world, but the idea is that that $140,000 
number up there, that is total revenue for the farm from all 
sources, from all crops, and if you have, for example, a 50 
percent loss in one commodity but your insurance payment does 
not even kick in on that commodity, the disaster payment will 
be there even though the insurance payment may not.
    So this concept to me is about how do you get whole farm 
coverage on an individual basis. In fact the Administration's 
proposal which we have carefully looked at on their counter-
cyclical revenue part, they talk about that on a national level 
instead of a local or individual level and, I mean, the concept 
makes a lot of sense but if you have a pocket in the country 
where there is no production and the revenue then is much 
lower, there is no advantage to calculating these numbers on 
the national level. You need to get it to where the need, and 
that I think should always be the purpose of disaster payments. 
Let's get it to where folks actually suffered the disaster and 
let's be careful that we try not to spread it to anybody else.
    Senator Klobuchar. Thank you.
    Senator Conrad. Can I just emphasize how important that is. 
One of the things we got to get out of these Washington Post 
stories is precisely that. We are casting too broad a net. It 
is undifferentiated assistance and we are always going to get 
told that it is wrong.
    Mr. Johnson. It is.
    Senator Conrad. We have got some of our colleagues, we will 
not say what part of the country they are from, they are not 
from our part of the country, who want disaster assistance when 
they have not suffered a disaster. We have had a very, very 
tough fight with those folks. That is not right. That is going 
to kill the whole approach when we have got colleagues who want 
disaster aid when they have not suffered a disaster.
    Congressman Pomeroy.
    Mr. Pomeroy. Commissioner, you talked about how I have to 
zero in on the core purpose in the Farm Bill, which is to 
protect family farms. They have to have some kind of meaningful 
payment and not dilute the assistance to most family farms. It 
politically exposes the program and frankly they underwrite the 
consolidation of the farms, and help chase the family farms out 
of existence. I think it is extraordinary you were able to get 
consensus across the Ag commissioners for payment limits. You 
have not been very successful in getting acceptance across the 
Ag Committee for payment limits.
    In testimony 2 weeks ago before the House Agriculture 
Committee, a very diverse group of commodities did have 
consensus against the Administration's proposal where on 
adjusted gross income less than $200,000 is needed to be 
eligible to participate in the Federal farm program. We thought 
that was too stringent. Do you have a formula?
    Mr. Johnson. Well, one of things that we recommend, 
Congressman Pomeroy, is that the very first step in payment 
limitation is that your calculations have got to be solid. You 
can not have all the enormous loopholes around them. That is, 
in my judgment that is step one.
    You can talk about squashing that number down to, any 
number you want, if in the end people can get around it by 
creating multiple entities on top of multiple entities and 
getting a limit on top of a limit, on top of a limit, on top of 
a limit, it does not matter what the number is.
    So how we got consensus among the Ag commissioners, what we 
really did on this issue, I mean, it was unusual in this Farm 
Bill and the last time on the current Farm Bill we tried and we 
could not get any, I mean, we basically have a rule if somebody 
really strongly disagrees they get to field the idea, so among 
all the 50 States we agreed that the most important thing is 
let's be honest about what the numbers are and let's make sure 
that you get rid of these loopholes, the three-entity rule, 
let's bring in the trading, certificate trading opportunities 
under the limitation so that they all count.
    So the assistance that is provided really is limited by 
whatever the number is that you folks choose is appropriate.
    Mr. Pomeroy. Thank you.
    Senator Conrad. Thank you. Thank you, Commissioner Johnson, 
deeply appreciate you talking the time to be here and 
presenting testimony.
    Next I am going to call the third and final panel. Robert 
Carlson, President of the North Dakota Farmers Union; Jocie 
Iszler, representing North Dakota Renewable Energy Partnership; 
Mike Martin, Chairman of the North Dakota Grain Growers 
Association; Bill Hejl, Red River Valley Sugar Beet Growers 
Association; Kevin Waslaski, President of the Northern Canola 
Growers Association; Paul Thomas, Director of Northern Pulse 
Growers Association; Brian Kramer, Director of Public Policy 
representing the Farm Bureau; and Dr. Jason Hill, Department of 
Ecology, Evolution and Behavior; University of Minnesota.
    Let me indicate to you we are asking each of the witnesses 
to restrict your testimony to 5 minutes. Your full statement 
will be made part of the record. We also indicate we have a 
clock on the table to your left and the timer will hold up a 1-
minute card when you have 1 minute remaining. Where is our 
timer?
    We want to indicate that because of the weather the 
Stockmen's Association, their president could not get here 
because of the weather. We certainly understand that. And Jocie 
is here replacing Mike Clemens, who could not come because of 
the weather. And Brian Kramer is here replacing Eric Aasmunstad 
who I understand had a family emergency.
    Robert, welcome.

 STATEMENT OF ROBERT CARLSON, PRESIDENT, NORTH DAKOTA FARMERS 
                             UNION

    Mr. Carlson. Thank you, Senator Conrad. Thank you, Senators 
Coleman and Klobuchar and Congressman Pomeroy for being here as 
well and for this opportunity to address the issues surrounding 
the new Farm Bill that is currently being developed in both the 
House and the Senate.
    Let me just get right at it. I will summarize the written 
testimony that has been submitted to your Committee.
    In general, the 2002 Farm Bill is popular among farmers and 
ranchers in North Dakota. It needs some updating, it needs some 
improvement in some areas, some increase in the loan rates and 
so forth. The biggest lack was the, or biggest deficiency was 
the lack of a permanent disaster program and we need to fix 
that in this Farm Bill. We need a permanent disaster program 
and we would suggest, as did the Ag commissioners, that a 
source of revenue for that program could be to take some of 
the, a couple payments we are currently getting, which I think 
runs at a little over $5 billion a year average, funding 
disaster program, I am told if we fund we have in the past 
would probably run about $2 billion a year.
    So maybe a portion of that, unless we sweeten the disaster 
program and take more, a portion of that, a couple payments 
could be used for funding permanent disaster programs and we 
would support that.
    On farm program changes, the most important thing in the 
farm program is a counter-cyclical safety net. Farmers do not 
need Government support when prices are good and production is 
good, we do need it when prices fall.
    And again, like a lot of farmers, we also tend to think 
when we have prosperity and when we have got prices they are 
going to last forever. Never in my history, which is getting to 
be a little bit longer than it used to be, have we ever had 
sufficient prices. So we need to be ready to provide a safety 
net in those times when prices drop again, as they surely will.
    A popular myth, Senator Conrad, you mentioned this a little 
bit, a popular myth in the urban press is that farmers get 
money from the Government just because they can. They really do 
not understand the counter-cyclical nature, the economics of 
agriculture and they think that somehow Government funding and 
Government programs are making farmers rich, and I would like 
to address that for just a minute.
    According to USDA, in 2005 the average farm income was 
about $76,000 but what wasn't considered is that 80 percent of 
that total was off farm income, leaving just around $12,000 to 
account for actual farm income. We can do better than that. 
Farm policy should insure the producers can earn the income 
equivalent to families in other sectors of our national 
economy. In the current Farm Bill the counter-cyclical safety 
net approach works well and should be continued.
    The loan program, we believe, is the most important part of 
the counter-cyclical safety net and according to NDSU, the 
Center for Ag Policy and Trade Studies, the impact of the loan 
program is much larger than other parts of the farm program in 
terms of providing a safety net to farmers, $16.00 an acre for 
medium sized farm.
    Probably just as important is some sort of indexing of loan 
rates, or payment rates to account for the increasing cost of 
production especially in times of high-energy costs. In the 
past loan rates were based upon historic prices, an average of 
past market prices. We believe this formula is out of date due 
to vastly higher production costs and escalating energy prices. 
We call for the loan rate to be based on the cost of production 
and we would call for the loan rates to have equity among 
commodities.
    Wheat, for example, has a loan rate right now at 70 percent 
of the cost of production. Barley is, or corn is at 85 percent. 
Some of the oil seeds are close to a 100 percent. We need to 
find a formula that achieves equity in the loan rates and we 
need to increase those loan rates based upon the cost of 
production.
    On conservation, very briefly, we want to see the 
conservation security program funded fully. We believe that 
does hold some promise for producers in our state. We would 
like to see CRP continued but only on the most environmentally 
sensitive lands, and we would like to see a CRP program that 
would offer shorter contracts for specific conservation needs. 
We would also encourage a conservation program that rewards 
producers for adopting practices that reduce greenhouse gases.
    On energy, we would like to see an energy title in this 
Farm Bill. It should include provisions, as we have talked 
about, or talked about somewhat already that would incentivize 
local ownership of the value added energy products, whether 
projects, what would they be, ethanol, biodiesel, or wind 
energy, cellulosic production, and so forth. We think that is 
important that ownership should be incentivized to be local.
    And, finally, members of the Committee, our vision of the 
success of any Farm Bill has to be the level of net income that 
is provided for producers. Farm policy should not be developed 
for multinational corporations, processors, importers or 
exporters. The family farm is the keystone for a free 
progressive democratic national societies as well as the strong 
America.
    Above all, the farm policy needs to recognize and build on 
the strengths of our nation's agriculture.
    Thank you.
    [The prepared statement of Mr. Carlson can be found on page 
57 in the appendix.]
    Senator Conrad. Thank you, Robert. Welcome. Thanks for 
taking over this assignment on short notice. We appreciate it 
very much.

STATEMENT OF JOCIE ISZLER, ON BEHALF OF MIKE CLEMENS, CHAIRMAN, 
           NORTH DAKOTA RENEWABLE ENERGY PARTNERSHIP

    Ms. Iszler. Thank you, Senator Conrad and members of the 
panel. I appreciate this opportunity to testify on behalf of 
the North Dakota Renewable Energy Partnership.
    Mr. Clemens, who is from Wimbeldon, North Dakota was unable 
to be with us today, and I do feel comfortable being here 
because last year I was here as well.
    It has been my privilege, Mr. Clemens and I have served as 
chair to this group. North Dakota Renewable Energy Partnership 
consists of a cross-section of over 55 organizations 
representing both public and private sectors and has devoted 
enormous amounts of time and energy to promoting the 
development of renewable energy in North Dakota.
    Included in the written testimony is a list of 
partnership's members. The memberships range from private 
citizens to groups representing a large consistency such as 
Xcel Energy, North Dakota Association of Rural Electric 
Cooperatives, and the North Dakota Farmer's Union. The 
membership represents a significant portion of agricultural 
groups; however, the benefits of developing North Dakota's 
renewable energy positively affects every North Dakota 
citizen's life. Increased use of renewal energy means cleaner 
air for all citizens in North Dakota, not just farmers. And it 
will be all citizens, not just farmers, who will benefit from 
the higher paying jobs and additional state tax revenue and 
enjoy reducing our dependence on foreign oil.
    I would like to start referencing a study that the North 
Dakota Renewable Energy Partnership conducted this last summer 
in cooperation with the North Dakota Department of Commerce. 
The study, conducted by the UND Department of Governmental 
Affairs, assessed the opinions of 600 North Dakotans regarding 
renewable energy in North Dakota. The results indicated that 93 
percent of the North Dakotans surveyed believe that renewable 
energy should be a priority for our State legislature. 96 
percent believe that we should reduce our dependency on foreign 
oil by promoting renewable sources of energy and energy 
conservation.
    And all of the results of this study are summarized in this 
document which is provided in the back of the room.
    81 percent would support a law requiring utilities to 
generate 10 percent of their electricity from renewable 
sources. Only 13 percent favored fossil fuels for new 
electricity if they had to choose only one source, while 80 
percent preferred wind or other renewables and energy 
conservation. More than half are concerned about out-of-state 
interests owning North Dakota wind projects.
    In response to the results of this survey, the 
Partnership's main focus this legislative session has been 
Senate Bill 2288. The main objectives of this bill are the 
establishment of a comprehensive renewable energy policy for 
North Dakota, a Renewable Energy Research Counsel has developed 
a fund incentive and appropriations for those provisions by the 
State of North Dakota. The original legislation called for $20 
million. The original, the written testimony includes 22 
projects that could be funded via a competitive process 
established by the Renewable Energy Research Counsel and many 
of these projects do refer to a State and Federal partnership.
    First of all, funds advanced renewable energy 
commercialization. Provide competitive rewards to companies 
that would assist in commercializing promising technology in 
North Dakota, and I think that what Commissioner Johnson 
referenced in terms of glycerin is an appropriate project that 
fits with this. Eligible awards would include front-end 
engineering and design for a cellulosic ethanol and 
nanowhiskers project. These projects could range in the 
category of $2.5 million to $5 million.
    Another project is a dairy waste anaerobic digestion 
demonstration project. Mature technology now exists to provide 
low cost renewable energy to dairy farms that handle their 
manure as liquids and slurries. The EPA's AgStar program 
estimates that many anaerobic digester bio gas systems can be 
installed with a simple payback of three to 7 years. A range of 
investment would be $200,000 to $300,000.
    Another project is cost-share assistance for the 
installation of infrastructure to sell and distribute ethanol 
blends greater than 10 percent and biodiesel with a range of 
$570,000.
    Support of ethanol processing for hydrogen production-
system integration. A range of $30,000 to $50,000.
    The message of the NDREP to your Committee, distinguished 
guests, is that North Dakota citizens are very aware of the 
State's potential to producing renewable energy and are very 
supportive of using public funds for the develop of renewable 
energy. The Partnership is passionate about the growth of 
renewable energy in North Dakota and looks forward to 
supporting and advancing your work toward growing the nation's 
renewable energy resources and the energy title of this next 
Farm Bill.
    [The prepared statement of Mr. Clemens can be found on page 
62 in the appendix.]
    Senator Conrad. Thank you very much.
    Next we'll hear from Mike Martin from the Grain Growers.

STATEMENT OF MIKE MARTIN, CHAIRMAN, NORTH DAKOTA GRAIN GROWERS 
                          ASSOCIATION

    Mr. Martin. Thank you, Mr. Chairman. Welcome members of the 
Ag Committee and Congressman Pomeroy.
    Senator Conrad. Can you pull your microphone a little 
closer to you, Mike.
    Mr. Martin. Sure. In recent testimony I provided to the 
Congress' Subcommittee it was demonstrated that Specialized 
Wheat farms saw a 58 percent deficit in net income compared to 
other wheat farms. The disparity between the two wheat farm 
types is quite apparent. It cannot be attributed to any one 
factor.
    However, it does indicate that Direct Payment and Target 
Price levels need to be adjusted in the upcoming Farm Bill. 
Recent estimates by USDA painted a similarly gloomy outlook for 
the next 10 years for the industry in general. All wheat net 
income for the 10-year projected timeframe comes in at 49 
percent of the average of competing crops.
    It has been acknowledged by the Secretary and numerous 
Congressional leaders that wheat was not treated equitably in 
the 2002 bill. The 2007 Farm Bill proposal endorsed by our 
association and our national organization would bring some 
equity back to the wheat industry. The proposal would raise 
direct payments and target prices.
    We at North Dakota Grain Growers feel this is justifiable 
in order to maintain a healthy and sustainable state of wheat.
    Recent studies performed at Texas A&M indicate that without 
upward revisions and price support mechanisms for wheat in 10 
years, even wheat producers who are in healthy financial 
condition will be at the point ever financial collapse. So the 
question of what direction farm policy takes in the near term 
will inevitably determine the future existence of North Dakota 
Dakota's No. 1 agricultural commodity.
    Mr. Chairman, another concern I have with the 2007 Farm 
Bill is the direction it takes concerning environmental policy.
    I feel the safety net that past farm bills have provided 
may well be lost to conservation programs. Commodity titles 
such as LDP's and CCP's provide the safety net that is sorely 
needed when producers face a negative market fluctuation. They 
not only provide financial stability to producers but also 
allow agriculture export trade and infrastructure to perform 
more efficiently.
    In addition it must be required that all climate change 
legislation be based on sound, peer reviewed science.
    The recent move toward biodiesel and ethanol only 
emphasizes the good decisions made in the past Farm Bills. The 
ability of our nation's producers to respond to the market 
factors such as the corn demand for ethanol and oilseeds for 
biodiesel would not be possible without planting flexibility 
afforded in recent farm bills. The America farmers has shown 
throughout history are built to raise adequate amounts of food, 
fiber and now bio energy fuel supplies.
    In return for this adaptability, it is appropriate that our 
Federal Government provide an adequate safety net to 
agriculture when situations such as market aberrations caused 
by weather, disease and yes, even political decisions both here 
and overseas throw curve balls at our producers.
    In the very near future our producers will be asked to 
enter into a new phase of the food, fiber and fuel equation. 
The cellulosic ethanol industry will not be able to grow and 
develop without the aid of committed producers. It is therefore 
imperative that forward thinking industry leaders be supported 
when new ideas are introduced to this infant industry. One such 
effort includes a proposal that has been spoke of by 
Commissioner Johnson.
    NAWG has embraced this policy and it is promoting it 
nationwide. In a nutshell this proposal may well solve the 
perceived question of which comes first, the chicken or the 
egg, when it is determined where and when industry will develop 
new cellulosic ethanol production areas and plants.
    Mr. Chairman, in summary we must take a hard look at 
history when looking to the future regarding agricultural 
policy. The recent relative strength in commodity prices must 
not be assumed to be a new plateau in prices. We need only to 
look at a historical wheat chart to prove that point. It is 
quite apparent that the price levels we are now seeing have 
been exceeded twice and equalled once in the last 30 years. The 
decline in prices following those price peaks shows the need to 
be prepared for what most certainly will occur in the future.
    Mr. Chairman, thank you again for this opportunity.
    [The prepared statement of Mr. Martin can be found on page 
88 in the appendix.]
    Senator Conrad. Thank you, Mike, thank you for that 
excellent testimony.
    Bill Hejl, Bill is known in North Dakota as a television 
star. Commercials and a campaign.

 STATEMENT OF BILL HEJL, PRESIDENT, RED RIVER VALLEY SUGARBEET 
                      GROWERS ASSOCIATION

    Mr. Hejl. Members of the Committee, Congressman Pomeroy. I 
am Bill Hejl, a farmer from Amenia, North Dakota and serve as 
President of the Red River Valley Sugarbeet Growers 
Association. We represent the farmers that grow sugar beets for 
American Crystal Sugar Company. Sugarbeet growers look forward 
to working with you to develop viable sugar provisions in the 
next Farm Bill.
    We also appreciate Chairman Conrad working with others in 
leadership in maintaining accurate baseline funding for the new 
bill. Additionally we understand the importance of a united 
agriculture and work shoulder to shoulder to develop 
commodities that allow American farmers to provide our nation's 
food security. We support the no net cost structure of U.S. 
sugar policy and oppose corporations $1.3 billion a year 
subsidy plan we are certain subsidy checks for sugar would not 
result in lower grocery prices.
    The sugar industry in our region is comprised of three 
farmer owned cooperatives operating 10 factories in four 
states. Growers have owned these cooperatives since the 1970's. 
We invest in new equipment and technology to efficiently 
produce and process our crop to keep U.S. sugar prices lower. 
The U.S. sugar industry has not had an increase in our support 
rate in 20 years. Yet our costs for fuel, fertilizer, and 
virtually every other input have increased substantially over 
that time. This has taken a toll on the America sugar farmers 
and the people who turn our crops into sugar and we have lost 
thousands of American jobs and more than 35 beet and cane 
factories have closed. The Farm Bill must address these higher 
costs.
    As we struggle with higher costs, we also fight to keep a 
share of our own market. Trade Agreements threaten us with more 
and more subsidized foreign sugar. We fight because without 
adequate raw materials our production costs increase 
dramatically.
    The current example of this fight is the trade relationship 
with Mexico. Our sugar prices have plunged since last year when 
the Administration committed to import 250,000 tons of sugar 
from Mexico and another quarter million from our WTO trade 
partners. This action on top of a bumper crop in the United 
States has significantly over supplied our market. Mexico does 
not have excess sugar to ship to us so they are buying it from 
neighboring countries. They are shipping sugar they do not have 
and we do not need. That just is not right. It especially is 
not right when American farmers have stored 300,000 tons of 
American sugar this year to balance ou r market. We could send 
it to Mexico but they have a 12 cent a pound tariff. The U.S. 
tariff on Mexican sugar is only a penny and a half. 12 cents 
versus one and a half cents, once again that is not right. We 
believe that the USTR and USDA should ask the Mexican 
government to increase its duty free tariff rate quota for U.S. 
sugar to 100,000 metric tons raw value and give the U.S. sugar 
producers duty free right of first refusal to fill any 
additional Mexican needs. If Mexico refuses that would clearly 
call into question their commitment to NAFTA.
    Our growers are also deeply concerned about Mexico's long 
history of noncompliance with their sweetener trade 
obligations. Our government must insure the trade between our 
nations allows no cost sugar policies to continue. Failing that 
our Government must act swiftly as no industry can wait months 
or years to seek justice. There is no justice or victory in 
winning if you watch your businesses die.
    Finally, beet farmers are deeply concerned that the 
developing nations that export 75 percent of the world's sugar 
do not have the same labor, safety and environmental laws we 
do. Those foreign producers will gain an advantage simply 
because of trade agreements. Please watch trade negotiations 
closely. Do not allow any agreement to ignore these 
differences.
    With the 2007 Farm Bill we agree with USDA's proposal to 
retain the basic no cost structure in the existing sugar 
program. However, we object to the USDA's request they be given 
sole discretion to reduce domestic sugar production. Secretary 
Johanns and USTR Ambassador Portman pledged to dispose of the 
surplus imports to balance the market only for the current Farm 
Bill. Now Secretary Johanns proposes instead to balance the 
market on the backs of American farmers. He should look out for 
American farmers and extend his commitment to dispose of 
surplus foreign sugar for the life of the new Farm Bill.
    Efficient U.S. farmers should not take a back seat to 
subsidized foreign sugar producers. As the world's second 
largest sugar importer, it is trade agreements, not U.S. 
producers that over supply the American market. Therefore, we 
need a mechanism to efficiently use surplus sugar if we are to 
remain no net cost. U.S. producers are in the business of 
providing sugar for the food market. However, when the market 
is oversupplied as a result of excessive access provided by 
trade agreements, one of the few alternative uses for that 
sugar may be bio-fuels. Sugar, as an addition to America's bio-
fuel needs will take some time to develop, and may require 
Government interventions similar to those used in competing 
countries such as Brazil and the European Union.
    Finally we are working to make the sugar program more 
predictable to improve the Secretary's ability to properly 
administer it. We will share those details with you in the near 
future once we finalize our recommendation.
    Thank you for this opportunity to share our views.
    [The prepared statement of Mr. Hejl can be found on page 64 
in the appendix.]
    Senator Conrad. Thank you, Bill. Appreciate very much your 
testimony and we all know we have got challenges in various 
sectors of the industry. We have got special costs for our 
neighbors from the south in Mexico. Been a series of what I 
would characterize as misrepresentations by them in our 
negotiations and we simply have to adjust for that in the new 
Farm Bill.
    Next is Kevin Waslaski, President of Northern Canola 
Growers Association. I hope I pronounced your name right.
    Mr. Waslaski. Yes.
    Senator Conrad. You tell me how do you say it.
    Mr. Waslaski. Waslaski.
    Senator Conrad. Welcome.

STATEMENT OF KEVIN WASLASKI, PRESIDENT, NORTHERN CANOLA GROWERS 
                          ASSOCIATION

    Mr. Waslaski. Thank you. Thank members of the panel for 
inviting me here.
    I would like to thank you at this time for your funding of 
these farm research projects and as you know they are earmarked 
so we did get funding. Very valuable piece of work for us and 
keep that in our Farm Bill every commodity can use research 
funding.
    And we also like to thank you for your continued effort on 
the disaster. It shows a need for crop insurance reform and 
disaster title.
    Oilseed producers support the basic structure of the 2002 
Farm Bill. However, they are not satisfied with the level of 
support provided oilseeds under the 2002 act, and urge Congress 
to adjust these levels.
    There has been no counter-cyclical payment to oilseed 
producers under 2002 Farm Bill. These distortions can cause 
major shifts in planting decisions between crops. To address 
these inequities, oilseed producers support adjusting marketing 
loan rates and target prices upward to common percentages of 
recent average prices. The 5 year period of 2000 to 2004 is 
selected because it includes several low price years as well as 
several high price years. An olympic average of season average 
prices.
    For the marketing loan program, the proposal sets loan 
rates not less than 95 percent of the Olympic average. The 
counter-cyclical program target price would not be set less 
than 130 percent of the 2004 Olympic price average.
    On the energy title of it, the Northern Canola Growers 
supports authorizing a biodiesel incentive program under which 
the Commodity Credit Corporation would make commodity 
reimbursements to domestic biodiesel producers to offset 
foreign government incentives provided to biodiesel exported to 
the United States.
    Unlike ethanol, biodiesel does not have an import tariff to 
offset the value of its tax incentive. Biodiesel importers who 
pay U.S. duty of only 4.5 percent are eligible for the one 
dollar per gallon agri-biodiesel tax credit. We are starting to 
see ships coming into our gulf with T-100 and they are getting 
the tax credit, blending it, sending it back overseas. It is 
not even used in our domestic uses. Is so we need to support 
this biodiesel incentive. Argentina taxes biodiesel exports at 
5 percent but they tax exports of soybean oil at 24 percent so 
they are supporting 19 percent, having it crushed over in their 
own country and shipping it over as biodiesel. There is a 
differential there.
    Under the expiring bio energy program, biodiesel incentive 
program would authorize CCC to use eligible commodities to 
reimburse U.S. biodiesel producers on all domestic biodiesel 
production. The reimbursement would equal the 43 percent per 
gallon benefit to biodiesel exported under Argentina's DET 
export subsidy program.
    The biodiesel incentive program would also help new U.S. 
biodiesel industry survive periods when the price relationship 
between soybeans or canola oil diesel and petroleum diesel is 
negative for biodiesel production. This is particularly 
important as investors are responding to the new biodiesel tax 
incentive by building biodiesel plants in rural America.
    And last I would like to mention a little bit on the 
beginning farmer. I do not see a lot of people my age that 
their sons are graduating from high school even considering 
letting their kids start farming. They are all pushing away 
from farming. We need to get incentives there to keep the 
beginning farmer.
    [The prepared statement of Mr. Waslaski can be found on 
page 102 in the appendix.]
    Senator Conrad. Thank you, Kevin.
    Next, we will hear from Paul Thomas, Director of the 
Northern Pulse Growers Association. Welcome, Paul.

  STATEMENT OF PAUL THOMAS, DIRECTOR, NORTHERN PULSE GROWERS 
                          ASSOCIATION

    Mr. Thomas. Thank you, Chairman Conrad and members of the 
Committee. I am providing testimony for the Northern Pulse 
Growers who is a member of the U.S. Dry Peas and Lentil 
Council. We work together with growers in Montana, Minnesota, 
South Dakota and across the northern tier. They come together 
with a united front for representing our program.
    First of all, I would like to say that you know a lot of us 
in our industry and in our neighborhood are starting to use the 
P word again. That P word is not necessarily yellow pea or 
green pea but it is profit. That is here now. We believe that 
that is not always going to be here. That is why we need to 
keep the fundamental parts of the Farm Bill the way they are 
now with the counter-cyclical provision, the loan rate and 
build off that success and improve upon that.
    The 2002 Farm Bill was the first time our crops peas, 
lentils and chickpeas were included in the farm program. There 
are loan rates support payments that we as producers of peas, 
lentils and chickpeas support the current levels of the loan 
rates in the farm program right now and we would like to 
maintain those levels where they are at for our specific crops. 
In the 2002 Farm Bill, one crop that did not get provision in 
that was the large chickpeas. Small chickpeas are supported but 
the large chickpeas were not. We would like to resupport 
removing large chickpeas from the fruit and vegetable list and 
including them with the support price in this next 2007 Farm 
Bill.
    In my testimony I have the support levels that are there 
and support levels we are proposing on chickpeas which is 
$18.00 and go through how we came up with that in the support 
levels of justifying that.
    Also, in that last Farm Bill the pulse crops were not 
included with the direct and counter-cyclical payment 
provisions. Now if there are ways that we can work with the 
Committee and involves pulse crops in those direct payments 
levels we would like to make that equal to wheat payment 
levels, and then also the counter-cyclical provision that 
royalty groups are proposing are very supportive of that.
    One new concept that we have in the pea, lentil and 
chickpea industry developed is called the pulse energy 
conservation incentive payment and we even got Nate Ackerman to 
support.
    Senator Conrad. That is the Nate Ackerman?
    Mr. Thomas. Yes.
    Senator Conrad. We will take your word for it.
    Mr. Thomas. In order to reduce our incentives on foreign 
oil, we certainly support energy enhancement programs that 
support renewable energy developing renewable energy projects. 
We also think there should be a provision that supports 
reduction in the use of fossil fuel and in fertilizers and 
programs such as that. And we feel that pulse crops, ones that 
do not require adding fertilizer, nitrogen, phosphorous should 
be produced should also be rewarded in reduction on the 
nonreliance on not natural materials that we have to purchase 
through energy making products. So we have developed a program 
that is in our testimony there, too, with the 40 pound rate of 
nitrogen credit saving at nitrogen levels that would pay 
producers $15.00 an acre for producing pulse crops.
    Senator Conrad. Your group came and presented this proposal 
some weeks ago. I really think you have been very creative. It 
is a new approach. You know, anything new is going to be 
extremely difficult to get but there is a strong rationale for 
what you put forward and if it fits into the basic concept of 
this Farm Bill, it is going to be very energy oriented, so I 
salute you and your group for being creative.
    Mr. Thomas. With the Ackerman group?
    Senator Conrad. No.
    Mr. Thomas. So in summary on the main things, we are very 
supportive of where we are at and be included.
    There is a couple other things I would like to note that 
our organization would really like you to consider is an 
increase in MAP and FMD funding. We are proposing increases of 
MAPs of $325 million, FMD of $50 million. Those marketing 
programs really help us in promoting our crops overseas and 
helping to compete with other countries.
    The other thing is food aid. Our crops sustain food aid and 
the inclusion of the aid programs and we are strong supporters 
of remaining, or keeping that program, purchasing U.S. 
commodities with cash and not just providing that cash out 
there.
    We noted a couple and, in my testimony I have got a lot 
more things. I appreciate the opportunity to speak today.
    [The prepared statement of Mr. Thomas can be found on page 
94 in the appendix.]
    Senator Conrad. Thank you, Paul.
    Next we will hear from Brian Kramer from the Farm Bureau. 
Brian, again thanks for filling in on short notice.

   STATEMENT OF BRIAN KRAMER, ON BEHALF OF ERIC AASMUNSTAD, 
              PRESIDENT, NORTH DAKOTA FARM BUREAU

    Mr. Kramer. Thank you Chairman and members of the 
Committee.
    As Senator Conrad said, my name is Brian Kramer and I am 
standing in for our state president today. We certainly thank 
you for holding the hearing here in the State of North Dakota.
    The Farm Bureau believes that a continued maintenance of 
the structure and funding that we have in current Farm Bureau, 
or current Farm Bill is a high priority. The Bill provides a 
safety net for producers, provides leverage for the trade 
negotiators and provides needed conservation program support.
    Since the WTO talks were suspended it is uncertain and it 
is uncertain whether they will resume. We seek an extension of 
the current Farm Bill.
    Senator Conrad spoke of some of the talk in D.C. and 
Washington Post in their taking a hit at producers for farm 
program payments, but we need not apologize for our farm 
program payments to our farmers. Farm program payments are a 
public investment in the nation's food, environmental and 
economic security. They help provide some measure of stability 
to a volatile business of food production and keeping the 
Americans supplied with the safest and most affordable food in 
the world. The consumers think they are getting a good deal by 
spending less than 12 percent of their disposal income on a 
nutritious, safe and quality food supply, then they should 
conclude that it is a good policy to provide a measure of 
stability in our food production system.
    There has been some talk of the Farm Bill payment 
limitations. The Farm Bureau opposes changes in the current 
Farm Bill payment limitation. One of the primary objectives of 
the Farm Bill was to improve the financial safety of our 
farmers. Proponents argue that Farm Bill causes farmers to 
enlarge their operations. This oversimplifies farm economics. 
Farmers expand in order to achieve economy of scale and to be 
competitive in domestic and international markets. Limitations 
and increased regulatory burdens do not promote efficiency or 
competitiveness but they do increase the cost.
    Despite the big payments that are always highlighted in the 
press reports, the vast majority of farm program payments go to 
family farm operations.
    I would like to turn now to conservation programs. The 
current Farm Bill is the greenest Farm Bill in history in terms 
of authorized conservation funding. Improved environmental 
practices will benefit everyone through improved soil, water 
and air quality and wildlife habitat. Voluntary and incentive-
based programs have historically worked the best for our 
producers.
    We need to be careful as we consider a more conservation-
based program to keep in mind the income support that the 
current program provides. Conservation programs are not a 
perfect substitute. Consider the CRP program. It could be 
argued that it actually displaces farm income on a dollar-for-
dollar basis. Working conservation programs such as the EQIP 
program and CSP program share the cost of environmentally 
friendly investments in farm capacity. Conservation programs 
are critical but they have to work in conjunction with rather 
than as a substitute for current commodities programs.
    We expect working land programs to become linchpins of 
conservation titles. As such they must be made available to all 
producers and adequate funds must be appropriated to make it 
effective programs. CSP in North Dakota has not been made 
available to all of our producers. And there have not been 
adequate funds for that program. A lot has been talked about 
renewable fuels. Renewable fuels, renewable energy must play a 
major role in the next farm Bill. Funding for projects, 
research and biodiesel and wind energy are very important. 
Expansion of renewable energy in North Dakota is encouraging. 
The opportunity for ample agriculture must be considered in 
light of that.
    Mr. Chairman and members of the Committee, there is a 
number of other things that I have listed here but it is in our 
complete testimony and with that I will stop.
    [The prepared statement of Mr. Aasmunstad can be found on 
page 52 in the appendix.]
    Senator Conrad. Thank you, Brian. Thank you for your 
testimony. Thanks again for filling in for Eric, who had a 
family emergency.
    Next we will hear from Dr. Jason Hill from the Department 
of Applied Economics for the University of Minnesota. Welcome 
to Dr. Hill.

  STATEMENT OF JASON HILL, RESEARCH ASSOCIATE, DEPARTMENT OF 
    ECOLOGY, EVOLUTION AND BEHAVIOR, UNIVERSITY OF MINNESOTA

    Mr. Hill. Thank you very much, Mr. Chairman, and members of 
the Committee. Thank you for the opportunity to speak with you 
today about the research on biofuels my colleagues and I 
conducted at the University of Minnesota.
    There I am part of a diverse team of economists, 
agronomists, engineers, ecologists and policy experts who are 
collaborating to better understand the various facets of 
renewable energy production.
    The rapidly expanding biofuels industry in this nation has 
been led by corn ethanol and soybean biodiesel. Together these 
have offset a portion of our gasoline and diesel use while 
boosting farm profits and reducing greenhouse gases. Although 
both of these biofuels are and will continue to be integral 
parts of our transportation energy portfolio, we need to expand 
and diversify our biofuel supplies. We need to develop biofuels 
produced from feedstocks grown on land other than our most 
fertile farmland. We need to do this in ways that benefit both 
farmers and the environment.
    Our work has identified one such system that is ideally 
suited to production on our marginal and degraded lands. We 
found that biofuels with tremendous energy, economic, and 
environmental advantages can be produced from mixtures of 
native prairie plants including grasses, legumes and other 
wildflowers. Allow me to briefly describe the experiments we 
have conducted.
    This is our plot in East Bethel, Minnesota. Each one of 
those little squares there is 10 yards by 10 yards.
    We wanted to learn which mixtures of native prairie plants 
are best for producing biofuels such as ethanol. Which mixture, 
for example, would produce the most energy and which mixtures 
would reduce greenhouse gases the most. Also how much new 
energy and greenhouse gas reduction would a mixture of species 
provide compared to a single species such as switchgrass?
    To answer these questions we planted 168 plots with either 
a single species like switchgrass or a mixture of species (2, 
4, 8 or 16) on this agriculturally degraded farmland. For over 
a decade we measured the total amount of biomass each plot 
yielded and the total amount of carbon dioxide that each plot 
removed from the air and stored in the soil.
    We found at our study sites mixtures romoved large amounts 
of 16 native prairie plants species produced 238 percent more 
energy on average than a single species such as switchgrass. We 
also found the highly diverse mixtures of carbon dioxide from 
the air and stored it in the soil, but that a single species 
did not. Why do we see these trends? Essentially highly diverse 
mixtures use available resources more efficiently--resources 
such as light, water and nutrients.
    Also in highly productive mixtures legumes, such as pulses, 
purple praireclover and wild lupine, were able to pull nitrogen 
from the atmosphere and make this important nutrient available 
to grasses such as big bluestem and little bluestem, which grew 
much larger as a result.
    The environmental benefits of producing biofuels from 
diverse prairie biomass are striking. Most amazingly producing 
and using ethanol from diverse prairie biomass can actually 
reduce the amount of carbon dioxide in the atmosphere. This is 
because a diverse prairie removes more carbon dioxide from the 
air and stores it in the soil than is released into the air 
when fossil fuels are burned to farm prairie biomass and 
convert it into ethanol.
    Senator Conrad. How much of an advantage is there? What are 
we talking about, 5 percent or 10 percent?
    Mr. Hill. With a single species we saw no carbon dioxide 
removed, but with 16 species we found it was many tons per 
acre. So there is a definite benefit to the synergy of the 
species in carbon storage.
    Senator Conrad. So it really works.
    Mr. Hill. It really does. There is a copy of the paper.
    Senator Conrad. What page of your testimony would have 
that?
    Mr. Hill. It would be, I have a handout here that 
summarizes the results from this paper that has the actual 
numbers behind this. If you are interested----
    Senator Conrad. That has already been published.
    Mr. Hill. This has already been published and peer reviewed 
and made the cover of Time.
    Senator Conrad. That is great.
    Mr. Hill. The carbon dioxide prairie plants removed from 
the atmosphere is stored as soil organic matter. This, along 
with the nitrogen added to the soil by native legumes----
    Senator Conrad. You are doing better work down at this 
University of Minnesota.
    Senator Klobuchar. And I also wanted to note just to make 
it worse, Dr. Tillman works for Dr. Hill and also had an 
article in the Washington Post.
    Senator Conrad. The back page.
    Senator Klobuchar. They actually had gotten beyond the 
scientific journal and we are very helpful to be helping us in 
Washington as we develop the cellulosic ethanol.
    Mr. Hill. We certainly appreciate it. Should I quickly 
summarize the rest of this or is there time to keep going?
    Senator Conrad. This guy may be running for the U.S. 
Senate. Briefly summarize. That is very good.
    Mr. Hill. The conservation benefits can be maintained if we 
mow prairie at the end of the growing season and leave portions 
for wildlife. It positively affects both wildlife use and 
energy use.
    The advantages for producing prairie biomass both to 
farmers and the biomass industry are remarkable. We can grow 
this on marginal and highly erodible lands such as those often 
put into CRP or CSP, and leave fertile farmland for traditional 
crop production.
    Also an acre of prairie biomass grown on marginal land can 
yield as much or more net energy in biofuels as an acre of corn 
ethanol produced on fertile cropland. This is because the 
fossil fuel energy requirements for growing prairie biomass and 
converting it into ethanol are so low relative to the amount of 
energy, fossil energy, to grow corn and convert it to ethanol. 
Once the prairie is established, it can be grown at 
considerably less expensive to farmers than either corn or 
switchgrass. This is because a prairie needs to be planted 
once, and maintaining it requires no pesticides or herbicides 
and only trace amounts of fertilizer.
    The advantages are clear. How can we best promote 
cellulosic biofuels such as ethanol from diverse prairie 
biomass as valuable complements to our existing crop-based 
biofuels. The question has taken on particular importance now 
that high corn prices are enticing farmers to take marginal 
lands out of conservation programs and place them back into 
corn production. This acreage shift has negative consequences 
not only for erosion and wildlife habitat but also for the 
carbon cycle. This is because land taken from conservation 
programs and returned back to production loses its ability to 
sequester carbon, even if no-till or reduced-till corn 
cultivation practices are followed.
    Making diverse prairie biomass ethanol or any other next 
generation biofuel a reality hinges upon recognizing that land 
can provide valuable ecosystem services such as carbon 
sequestration and soil restoration. We must reward those who 
treat the land in ways that provide these services to society. 
Incentive support may flow either to the farmers who manage the 
land or to biofuel producers who purchase biomass grown in 
environmentally beneficial ways. Such incentives may be in the 
form of direct support for farmers who grow diverse prairie 
biomass and I have seen drafted in legislation that Senator 
Klobuchar is putting forward. I am very pleased you are taking 
the lead on turning this opportunity into reality.
    We are now at a time when the rapidly expanding biofuel 
industry has effectively wed together three of our fundamental 
needs, energy, food and the environment. Our challenge is to 
find and promote solutions that mutually benefit our nation on 
all three fronts.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Hill can be found on page 67 
in the appendix.]
    Senator Conrad. Thank you, Dr. Hill. Were you raised on a 
North Dakota farm?
    Mr. Hill. No. I was raised on a Minnesota farm. My father 
sold corn seed for a living.
    Senator Conrad. We appreciate very much your testimony. I 
appreciate this entire panel. I know Congressman Pomeroy has 
to----
    Mr. Pomeroy. The Governor is taking an airplane so I am 
driving. We have a meeting in Grand Forks tonight.
    This is very diverse and the prospectus is being extremely 
illuminating to us. I thank you and thank you again for your 
participation.
    Senator Conrad. I would like to ask the panel, now the 
whole thrust of this Washington Post series is that farm 
program is a waste of money, that it's going to buy rich 
farmers and they are getting paid to do nothing. What would 
your answer be to people who are really, frankly our colleagues 
are reading this and those who do not know, are not intimately 
familiar with agriculture policy, they are wondering gee, has 
the Washington Post got this right. Robert, what would you say?
    Mr. Carlson. Well, the Washington Post, obviously, does not 
have it right. They are, as you suggested, printing very 
misleading statistics in talking about the total number of U.S. 
farms and what percentage of those get farm program payments 
and, of course, you can make it look as if a few large farms, 
and do not often define what they call a large farm. So it is 
misleading, it is inaccurate. If they took a sample, let's say 
they took a sample of a county in North Dakota or in Minnesota 
and said where do these farm program payments go and what is 
the average, that would be a truer picture and I wish they 
would do that. The other thing they do that really, I think is 
also threatening, they being the Washington Post and New York 
Times and Los Angeles Times is saying our farm program keep the 
Third World or developing nations in poverty, nation's farmers 
in poverty and a lot of cases those Third World countries 70 
percent or more of the population lives pretty much on a 
subsistence basis in rural areas and not technically farmers. 
That is not true either. We demonstrated that.
    We had a large group in last week, Senator, in Washington, 
DC from around the world, Africa, Asian farmers who were saying 
basically Cargill does not speak for me and your farm programs 
are not hurting our farmers. It is what the trade agreements 
did to us that are hurting us, requiring us and the developing 
countries import foods that they had been more self-reliant 
with producing themselves. So there is a lot of misinformation 
out there. We have, I think farm organizations need to do a 
better job of explaining what these programs actually mean to 
our producers.
    Senator Conrad. I am going to go right down won't too ask 
this question. This is your area. I would ask the other go 
right down and we will go to Senator Coleman. What would you 
say to the general thrust of these Washington Post articles?
    Ms. Iszler. I think it is important to fight misinformation 
with solid facts and I think the facts that the average 
American totally spends 9.9 percent of the disposable dollar on 
food versus Europeans at 18 percent speaks volumes. You have 
the cheapest food supply in the world and people need to be 
reminded of on that.
    Senator Conrad. Very good point.
    Mike.
    Mr. Martin. Thank you for the question, Senator.
    Perhaps this issue will never go away so we must address it 
straightforward and honestly. The biggest question is the 
percentage of cost of food for our people in our country. And 
one of the things we might want to really take a hard look in 
defending that policy is the experience we just had these past 
3 weeks regarding dog food and cat food from imported wheat by-
products, not domestic products.
    Senator Conrad. Very good point.
    Mr. Hejl. Thank you for asking the question, Senator. I 
have got a political cartoon showed up in the local paper 
recently. I retired from 34 years, almost 34 years of military 
service recently and I do not appreciate the misery of farmers 
being associated with the denying of our troops funding. It is 
a disaster of some of these national articles. The misery of 
farmers should have nothing do with funding our troops. If they 
go that far, you know they are telling lies about the rest of 
it. Thank you.
    Senator Conrad. Thank you.
    Kevin.
    Mr. Waslaski. Yes. Thank you.
    I have farmed for 27 years now and I would dare say that of 
all the years most of my input and what I get out of this crop 
is it takes most of my input. What I have received from 
Government payments has been my farm income most of those 27 
years. Without that farm income I think I would have a net farm 
loss every year.
    Senator Conrad. Well, that is a pretty powerful point.
    Paul.
    Mr. Thomas. Kind of like to reiterate what Kevin said. I 
worked for 7 years for commodity groups in North Dakota before 
returning home to the family farm 3 years ago.
    Senator Conrad. Where is your place, Paul?
    Mr. Thomas. Velva, North Dakota.
    You know, I have always heard what Kevin just said, and 
after working for commodity groups and hear that and hear that, 
it does not really mean that much to you until you are actually 
there and full time and your life depends on that income from 
that farm, and after 3 years I know our family would not be 
there if it was not for Government support.
    Senator Conrad. Brian.
    Mr. Kramer. Thank you. As I said earlier, we do not need to 
apologize for our farm programs. U.S. consumers reap many 
benefits from our farm programs and payments we receive for 
those, including a top quality stable economical food supply, 
including an environmental security that is next to no one in 
the world, including an economical food supply, better soil and 
water quality, air quantity, those types of things. If the 
American public wants those types of things and wants an 
inexpensive, very good food supply, then we need to have a farm 
program.
    Senator Conrad. I appreciate that. I appreciate the answers 
by all of you and I appreciate the passion you bring to this 
and the effort and energy you have put into helping agriculture 
be successful in this State and in this region.
    Senator Coleman.
    Senator Coleman. Thank you, Senator. That was a great 
question. I'm going to delve into a part of it. I think you 
summed it up. Great question and thank the panel.
    I do have another thing to factor into it. If you had a 
pulse energy conservation and nitrogen credit program you can 
have a cheese cake program which would be very powerful. Lots 
of ideas that are out there. One of the number of constants I 
want to share with you throughout these panels, one, obviously 
the reports of a safety net and the sun does not always shine. 
I think we got that message so we will be able to act on it.
    The other obviously is energy issue and the energy 
opportunities that are out there.
    Dr. Hill, how soon do you think we could move to some 
commercialization of some of the cellulosic opportunities that 
are out there?
    Mr. Hill. We can begin today. One of the things we are 
putting together is on the back of the handout I have here--is 
using biomass in existing ethanol facilities to provide process 
heat and electricity. This helps us resolve that chicken and 
the egg scenario where we have a market already existing for 
biomass. When the processes for making cellulosic ethanol come 
online, biomass will alreasy be available. Ethanol plants can 
make that transition later.
    So we need to begin establishing the prairies, the lands 
today and provide incentives for ethanol producers to utilize 
the biomass as an energy source in their current production.
    Senator Coleman. The ability to pull together energy and 
food, environmental its just pleased I am at the center of all 
the topics.
    Mr. Hejl, I wanted to comment on, I had the Undersecretary 
of Farm and Agricultural Services, Dr. Keanon come before our 
committee for confirmation. I asked him about the issues you 
talked about, the resolution the dispute resolution of his 
predecessor handled and he apologized in front of me. Said 
that, and these are his words that they at USDA had 
underestimated sugar yields based on estimates. They allowed 
more imports than they needed. The reality, of course, is these 
people's lives are affected by this. I think the actions of the 
predecessor outrageous and hopefully we have learned from that 
experience.
    Also on the energy issue, I have raised this issue, sugar 
ethanol, and I notice there is concern about doing anything 
that undermines the validity of a no course program, no course 
tax base. Kind of hold your breath. The reality, and that has 
to be preserved. At the same time I do not see any conflict 
with that. I guess my question, it is not in conflict but the 
reality with these trade agreements, with NAFTA, in 2008 we 
face the prospect of significant input of Mexican sugar, that 
we need something to soak it up so we keep our sugar program in 
way that continues to be so important to taxpayers. There has 
been a lot of discussion about that. What is your position on 
the prospect of the sugar ethanol program, something that we 
should take a look at.
    Mr. Hejl. Sugar ethanol or any biofuel program is something 
we are currently talking with our brethren about and we are not 
quite ready with a national position on that. We are certainly 
looking forward to working in a bipartisan way with the 
Committee on that when you come up.
    Senator Coleman. I am told that 100 million gallons of 
sugar ethanol production would take could be, in Florida, but 
could take care of all the conditions of imported sugar and 
allow us then to preserve that no course program. I look 
forward to working with you.
    Mr. Hejl. We look forward to working with Congress and 
every Member of Congress.
    Senator Coleman. Mr. Martin, your full testimony is in your 
oral testimony, your written testimony. Again, looking at 
cellulosic, you recommended 40 percent the cost of cellulosic 
feed stock for the first year of cellulosic ethanol refineries 
life be offset. I would like two questions on that.
    One, the 40 percent figure, where does that come from? And 
do you think that will be enough of an incentive in year terms, 
question is, in year terms two to 3 years investment in 
cellulosic ethanol products?
    Mr. Martin. The 40 percent is a figure that can be raised, 
can be lowered. We have to start somewhere in trying to decide 
how we can solve this problem of developing cellulosic energy. 
I was very encouraged not necessarily by who got the funds but 
recent grants from the energy department to Iogen and to 
several different companies to help move forward with a 
cellulosic initiative. Now companies such as Iogen are looking 
at additional funding, loan guaranties for their ventures. 
Iogen itself has been looking at starting their plant in Idaho 
last fall. Now it has been put off to next spring. We are 
encouraging quick action in order for them to move forward with 
their pilot program, and we are also encouraged by work we are 
seeing in Iowa where a corn based plant is being converted into 
a cellulosic plant.
    Senator Coleman. One other question. You know if there is 
survey in Minnesota similar to what, I would suspect 
Minnesotans would have the same strong public support for 
renewables. Are you aware of any similar data on a regional 
basis or is it simply something you have done in North Dakota 
and they have not done in Minnesota.
    Mr. Martin. Are you speaking of the energy title?
    Senator Coleman. The survey work. I am trying to find out 
what Minnesota, and I like to if strong public overwhelming 
some of the numbers, including, by the way, North Dakotans 
looking at obviously renewables over the oil based platform, 
but the numbers were pretty extraordinary. Do you know if there 
is any work in Minnesota?
    Mrs. Iszler. I am not aware of a similar survey in 
Minnesota. I think that the North Dakota survey was, an 
inspiration behind doing the survey was to confirm what many 
people in the industry believe to be present in public opinion. 
Of course, Minnesota has been very much a leader in actually 
doing some of the things that North Dakota is working on. So 
perhaps the survey was not necessary in Minnesota.
    Senator Coleman. She should be a senator.
    Senator Conrad. Wait a minute. Wait a minute. You know, you 
know, we are so pleased with the representation.
    Senator Coleman. I could ask many more questions but I am 
not going to ask you any questions. I see Kevin from the 
Minnesota Farm Bureau is here. I ask him questions all the 
time. I will do that off the record.
    Thank you again. Extraordinary panel. If we had time I 
would have more questions. This has been very, very great help 
for us and we have questions and we will take this back to 
Washington and what you said here will make a difference.
    Senator Conrad. Thank you. Thanks for being here, Senator 
Coleman.
    Senator Klobuchar.
    Senator Klobuchar. Thank you and thank you, Senator Conrad, 
for making my first farm field hearing so pleasant.
    I just wanted to talk to our Minnesotans down there, Dr. 
Hill. To expand a little on Senator Coleman's question about 
when can we start seeing some commercial use and you talked 
about how we could see it now. But my question is more about 
how, why we need support for this project.
    You can not just put it out there on market, but my 
understanding you do not reap the benefits immediately from the 
switchgrass in terms of the harvest and it takes time to do 
that. Can you expand on that a little bit?
    Mr. Hill. It does take some time for the farmers to 
establish the perennial prairie system. It is a system that 
requires essentially killing off what is on the land already 
and planting seed and reestablishing it in native species and 
waiting for a few years. Mowing it every so often at first 
gives some biomass, but not as much as you get later as the 
prairie becomes more established. So it is the sort of thing 
where you begin establishing the land to produce biomass at the 
same time that industry is moving forward on the efficiency of 
converting biomass to ethanol and other biofuels. Together they 
will progress one along side the other.
    Senator Klobuchar. Thank you. Thank you for your work on 
the issue. You know we are proposing some legislation that not 
only focuses on some incentives and work for farmers but 
continues with your work and land grant researchers, I think, 
Dr. Hill. Thank you. With Minnesota and North Dakota we need to 
focus on these issues.
    Mr. Hejl, I wanted you state earlier talking about the 
issues related to the fact there has been some violations, 
Mexico sending their sugar up and at the same time they might 
be taking sugar from other countries. I heard Guatemala, but 
other countries have got cheaper sugar. Could you talk the 
effect that would have on farmers and families in the Red River 
Valley?
    Mr. Hejl. I can talk about the effect it is having already. 
It dropped our sugar prices dramatically since the announcement 
was made last August. It depressed the market in United States 
since that announcement was made. If the same thing continues 
to happen after January 1 it is going to be that much more 
devastating. Continuing to ship sugar they do not have and we 
do not need up here, it is just not right.
    Senator Klobuchar. You called it to the attention besides 
us today of the Administration should be enforcing this 
agreement.
    Mr. Hejl. We have. We appreciate the bipartisan support we 
are getting to try to fight this issue, especially with a 12 
cent tariff going that way and penny and a half coming back 
here. That is crazy.
    Senator Klobuchar. I also wondered about this issue of the 
E85 pumps and attempt to try to get more ethanol pumps in our 
field stations across the country and I wondered if, Mr. 
Martin, do you have any comments you would like to make about 
that and what happened where North Dakota and efforts to try to 
spread the availability of renewable fuel pumps at the 
stations.
    Mr. Martin. I will defer to Jocie, our expert.
    Ms. Iszler. In terms of expanding the E85 stations, your 
question was in terms of the nationwide or in North Dakota?
    Senator Klobuchar. I wonder if there was effort going on in 
North Dakota and any thoughts you had to expand the 
availability.
    Ms. Iszler. I think the biggest challenge that North Dakota 
has had in E85 expansion of stations goes to availability. Much 
of the expansion that we experienced a couple years ago when we 
had 21 cent tax break was due to the fact that our stations 
were sources of ethanol from Minnesota and South Dakota. That 
was abruptly shut off when ethanol prices went to $3.00 a 
gallon because those ethanol plants did need to provide for 
their spot markets which made good economic sense. They could 
not afford to be generous with North Dakota stations anymore, 
and so when that ethanol supply went away and ethanol prices 
went through the roof, unfortunately at the same time as our 
tax breaks, and so that really did account for some of the 
stations that came on during that time, so availability----
    Senator Klobuchar. I wanted to thank all the panel for your 
forward thinking and all of the information we have gotten. 
Like Senator Coleman, I take away from this the shared idea we 
have to make a strong safety net. You think with the 
Commissioner Johnson who talked about we can not bet the farm, 
with high prices so good prices in the place we have to have a 
strong safety net. I want to thank you Mr. Carlson and other 
North Dakota farmers for the Agaria restaurant in Washington, 
DC and what a great idea that is. I hope to eat there again 
soon.
    Senator Conrad. I thank my colleagues, Senator Coleman and 
Senator Klobuchar to be here and thank you for the service on 
the Senate Agriculture Committee.
    We are going to work shoulder to shoulder on the Farm Bill 
as we fought for disaster assistance. They will be successful. 
I think you will be pleased with the results.
    This hearing has been important for your efforts. I want to 
thank the witnesses starting with the Governor, Commissioner 
Johnson, this third panel of some of the best farm group 
leaders and best farm thinkers in the upper Midwest. I deeply 
appreciate your taking the time to be here.
    I understand there is Dewy and wants to introduce Scott 
Stofferahn. Scott Stofferahn is the former head of the Farm 
Service Administration in North Dakota. Jim Miller was the 
clever numbers person in the last Farm Bill for the National 
Farmers Union. I was able to attract him to my Budget Committee 
staff. They are two lead negotiators, Scott was a lead 
negotiator in the last Farm Bill.
    We could not have a better team and I am extremely 
confident about the team that we are putting out on the field 
in this fight. Scott and Jim are just outstanding. So they are 
people you will want to be communicating with as we go through 
this. And, of course, I am always open to your suggestions and 
comments on questions as well.
    I want to indicate that the record will remain open for 
five business days. Additional testimony will be accepted until 
April 10th. And may be submitted to my myself and I will make 
certain it is forwarded to the appropriate committee.
    With that I again want to close by giving special thanks to 
Senator Harkin, the Chairman of the Senate Agriculture 
Committee, who has permitted this official hearing in North 
Dakota today. It was very good of him to do that. And to thank 
both Senator Harkin and Senator Chambliss for sending key aides 
to this hearing today so they could hear firsthand the concerns 
of people of North Dakota and Minnesota.
    With that we will conclude the hearing. Thank you all.
    [Whereupon, the Committee was concluded.]
      
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                             April 3, 2007



      
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                             April 3, 2007




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