[Senate Hearing 110-124]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-124
 
                        PART II: CHALLENGES AND
                          OPPORTUNITIES FACING
                    AMERICAN AGRICULTURAL PRODUCERS

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION


                               __________

                             APRIL 24, 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

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                                                                   Page

Hearing(s):

Part II: Challenges and Opportunities Facing American 
  Agricultural Producers.........................................     1

                              ----------                              

                        Tuesday, April 24, 2007
                    STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee 
  on Agriculture, Nutrition, and Forestry........................     1
Craig, Hon. Larry E., a U.S. Senator from Idaho..................    31

                                Panel I

Arnold, Kathie, National Organic Coalition, Truxton, New York....     3
Brady, Mark, American Honey Producers Association, Waxahuchie, 
  Texas..........................................................     8
Clarkson, Lynn, Organic Trade Association, Cerro Gordo, Illinois.     5
Jackson, Emily, Appalachian Sustainable Agriculture Project, 
  Ashville, North Carolina.......................................     6

                                Panel II

Brim, Bill, Georgia Fruit and Vegetable Growers Association, 
  Tifton, Georgia................................................    43
Kawamura, A.G., Secretary of Agriculture, State of California, 
  Sacramento, California.........................................    39
Korson, Phil, Cherry Marketing Institute, Lansing, Michigan......    34
Marshall, Maureen Torrey, United Fresh Produce Association, Elba, 
  New York.......................................................    36
Rice, John, former Chairman, U.S. Apple Association, Gardners, 
  Pennsylvania, on his own Behalf................................    41

                               Panel III

Fall, Clint, Midwest Dairy Coalition, Litchfield, Minnesota......    55
Jasper, Randy, National Family Farm Coalition, Muscoda, Wisconsin    60
Kozak, Jerry, National Milk Producers Federation, Arlington, 
  Virginia.......................................................    52
Robertson, Eugene, Pine Grove, Louisiana.........................    58
Tipton, Connie, International Dairy Foods Association, 
  Washington, DC.................................................    57
                              ----------                              

                                APPENDIX

Prepared Statements:
    Cochran, Hon. Thad...........................................    72
    Arnold, Kathie...............................................    75
    Brady, Mark..................................................    80
    Brim, Bill...................................................   101
    Clarkson, Lynn...............................................   107
    Fall, Clint..................................................   143
    Jackson, Emily...............................................   149
    Jasper, Randy................................................   152
    Kawamura, A.G................................................   161
    Korson, Phil.................................................   165
    Kozak, Jerry.................................................   169
    Marshall, Maureen Torrey.....................................   197
    Redding, Russell C...........................................   205
    Rice, John...................................................   208
    Robertson, Eugene............................................   214
    Tipton, Connie...............................................   217
Document(s) Submitted for the Record:
Jackson, Emily:
    ``Healthy Food and Communities Initiative''..................   232
    ``Healthy Food, Healthy Communities: A Decade of Community 
      Food Projects In Action....................................   240
American Peanut Shellers Association, prepared statement.........   268
Michigan Department of Agriculture, prepared statement...........   279
Produce Marketing Association, prepared statement................   282
South Carolina Fruit, Vegetable & Specialty Crop Association.....   287
South Carolina Peach Council, prepared statement.................   290
Western Growers, prepared statement..............................   293



                        PART II: CHALLENGES AND



                          OPPORTUNITIES FACING



                    AMERICAN AGRICULTURAL PRODUCERS

                              ----------                              


                        Tuesday, April 24, 2007

                                       U.S. Senate,
                                  Committee on Agriculture,
                                   Nutrition, and Forestry,
                                                     Washington, DC
    The committee met, pursuant to notice, at 9:18 a.m., in 
room SD-106, Dirksen Senate Office Building, Hon. Tom Harkin, 
Chairman of the committee, presiding.
    Present or submitting a statement: Senators Harkin, Conrad, 
Lincoln, Stabenow, Salazar, Casey, Klobuchar, Chambliss, 
Coleman, Crapo, Thune, and Craig.

    STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA, 
  CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

    Chairman Harkin. The Senate Committee on Agriculture, 
Nutrition and Forestry will come to order.
    First, I apologize to everyone for being late. There 
appears to be some big traffic jam that has plugged up 
everything out there. I don't think I am the only one who was 
caught in it, so I apologize for being late.
    Today's hearing further highlights the wide diversity of 
our nation's agriculture production. Last week, we heard from a 
good cross-section of animal agriculture--livestock, poultry, 
and eggs. We learned about the challenges producers face in the 
marketplace. Today, we will hear about the issues relating to 
specialty crops such as dairy, organic production, honey, and 
community-based food systems. Our hearing covers a wide range 
of issues, but all are related in several ways. They are all 
within the scope of matters to be discussed and addressed in 
the farm bill which we are working to recraft. And more 
importantly, they are related because each is integrally 
related to our agricultural economy.
    On our first panel are two important witnesses representing 
the organic food industry, from the farm to the consumer. The 
U.S. organic industry is the fastest-growing sector of our food 
enterprise in America, growing by some 17 to 20 percent per 
year. It represents genuine new opportunity for some who 
otherwise might be unable to stay in agriculture or get started 
farming. With this rapid growth in the organic market, the 
supply of domestically grown organic food often falls short of 
the retail demand. One of the testimonies that we will hear 
that I read last night showed how much we are importing 
compared to what we are exporting.
    We look forward to the recommendations of our witnesses for 
initiatives that can help those who want to pursue 
opportunities in organic agriculture. As Chairman, I intend to 
make that an important part of my Chairman's mark in the farm 
bill. The organic industry is disadvantaged by the lack of 
essential research and market data collection. We can address 
that in the farm bill.
    Another witness will discuss how the farm bill can help 
agriculture producers and consumers benefit from the expanding 
interest in the local marketing of regionally produced food. 
Community-based food projects have the added benefit of helping 
consumers understand exactly where their food comes from.
    The U.S. honey industry is facing one of the most serious 
threats ever from Colony Collapse Disorder. The bee losses 
associated with this disorder are staggering and portend 
equally grave consequences for the producers of crops that rely 
on honey bees for pollination.
    Previous farm bills have not generally given a lot of 
attention to the issues and challenges facing producers of 
fruits, vegetables, and tree nuts, usually referred to as 
specialty crops, even though these crops make up nearly one-
third of the cash receipts of all U.S. farm crops. Americans 
are consuming more fruits and vegetables per capita than 20 
years ago, still not near the recommended requirements, 
however. The new farm bill can and should include initiatives 
to encourage fruit and vegetable consumption and to help 
domestic producers continue to produce, make a profit, and 
succeed in the face of stiff foreign competition.
    The third panel this morning includes a diverse range of 
views and recommendations on Federal dairy policy. Again, dairy 
is an important part of the farm bill. The most recent annual 
milk sales figure of some $27 billion makes up about 10 percent 
of total U.S. cash receipts for agricultural commodities. In 
the 2002 farm bill, we included a new countercyclical Income 
Protection Program for dairy farmers, now dubbed the Milk 
Income Loss Contracts, the MILC Program, which has provided 
needed assistance to dairy farmers in times of low milk prices.
    So again, this will be an interesting series of hearings. I 
look forward to the witnesses. We have a tremendous challenge 
ahead of us to craft a sound farm and food and energy bill that 
will help improve income, profitability, and new opportunities 
for our nation's agricultural producers while addressing the 
variety of additional needs and objectives that demand 
attention.
    I might also add the farm bill, as it is called, also 
encompasses the broader economic well-being and quality of life 
for all rural Americans. It also includes the interests of 
consumers and the necessity of protecting and enhancing our 
natural resources and environment.
    So there is a lot in this farm bill that we will be 
covering and the witnesses today will give us some thoughts and 
suggestions on how we might also extend to their areas whatever 
help and assistance that we might provide in the farm bill.
    And so we will turn to our first panel, which is Ms. Kathie 
Arnold, National Organic Coalition of Truxton, New York; Mr. 
Lynn Clarkson of the Organic Trade Association, Cerro Gordo, 
Illinois; Ms. Emily Jackson, Appalachian Sustainable 
Agriculture Project in Ashville, North Carolina; and Mr. Mark 
Brady from the American Honey Producers Association, 
Washington, DC
    We will start with Ms. Arnold. In partnership with her 
husband, Rick, and his brother, Bob, Kathie has been farming 
for 27 years in their central New York town of Truxton. They 
have been certified organic for the last 9 years. With help 
from their 19-year-old son, other family members, and two non-
family employees, they have about 140 dairy cows plus young 
stock and crop around 700 organic acres.
    Ms. Arnold, welcome to the committee. I will say to all of 
you, your statements will be made a part of the record in their 
entirety, and they are very good. I read them last night. I 
would ask that each of you highlight the most important parts 
of your testimony in just about 5 minutes. If you see five 
minutes on the clock, start to wrap it up. I won't get nervous 
until you hit 7 minutes, Okay? So if you could do that, I would 
sure appreciate it because I would like to have more of a 
chance just to interact with you in questions and answers.
    With that, we will turn to Ms. Arnold. Welcome to the 
committee and please proceed.

    STATEMENT OF KATHIE ARNOLD, NATIONAL ORGANIC COALITION, 
                       TRUXTON, NEW YORK

    Ms. Arnold. Okay. Thank you, Chairman Harkin, and hello, 
members of the committee. As well as the description that 
Chairman Harkin said about me, I also serve on the Board of the 
Northeast Organic Dairy Producers Alliance, which is a member 
of the National Organic Coalition, and I offer my testimony 
today on behalf of both groups.
    Organic farming is a production system that enables family 
farms to have a viable and even thriving business that is both 
environmentally and family friendly. The process of 
transitioning is not easy for producers, nor should it be. 
Farmers make a commitment to produce according to the stringent 
standards for organic production and are rewarded when 
consumers buy organic products. The strong standards and the 
price premium go hand in hand.
    While the National Organic Program has been positive 
overall, there is still a great deal of work to be done to 
ensure that standards are consistent and strong. Most notably, 
the issue of pasture for organic livestock remains unresolved.
    Under the current USDA standards, organic livestock must be 
given access to pasture. But in spite of the clear requirement, 
this standard has not been adequately enforced by USDA. At a 
USDA forum on the subject a year ago, I and many others 
presented testimony urging a proposed rule specifying that 
organic dairy animals must consume at least 30 percent of their 
food needs from pasture for the growing season, which can be no 
less than 120 days. USDA's National Organic Program indicated 
that a proposed rule would be forthcoming, yet it is still not 
issued. We hope USDA will act quickly to implement a strong 
pasture standard. However, if they do not, there may be a need 
for Congress to act.
    As this committee undertakes the task of putting together 
the 2007 farm bill, I urge your consideration of several key 
proposals related to organic agriculture.
    One, the National Organic Certification cost share should 
be reauthorized and updated to reflect increased cost. This is 
particularly important in encouraging small and medium-sized 
operations to become and stay certified.
    Two, the Conservation Security Program should be fully 
funded with mandatory funding and be available in all 
watersheds. An easy crosswalk should be created between organic 
certification and CSP so that an organic farm plan can also 
provide eligibility for CSP benefits.
    Three, a National Organic Conversion and Stewardship 
Incentives Program should be created to provide financial and 
technical support to farmers for the adoption of advanced 
conservation practices as part of the process of converting to 
organic production.
    Four, Organic Research Programs should be reauthorized at a 
higher funding level, as Chairman Harkin suggested, to reflect 
organic's 3 percent share of the U.S. food retail market. Also, 
changes should be made to renew and enhance the public capacity 
for classical plant and animal breeding versus the current 
emphasis on biotech.
    Five, as food processors and retailers consolidate and 
dominate markets, farmers' leverage to negotiate fair prices 
and fair contract terms is in jeopardy. The Agricultural Fair 
Practices Act of 1967 should be amended to require processors 
to bargain in good faith with associations of producers.
    Six, when genetically engineered material is detected in 
organic product due to contamination beyond producers' control, 
farmers and processors can lose markets and are unfairly forced 
to bear the costs. A liability regime should be established so 
that farmers who suffer such contamination can recoup their 
losses from the manufacturers of genetically engineered seeds.
    Seven, organic producers are required to pay a 5-percent 
surcharge on their crop insurance rates, yet are often 
reimbursed for losses based on conventional prices without 
recognition of the higher value of their organic products. 
These inequities should be rectified.
    Thank you for your consideration of these proposals and for 
this opportunity to testify.
    [The prepared statement of Ms. Arnold can be found on page 
75 in the appendix.]
    Chairman Harkin. Ms. Arnold, thank you very much for a very 
succinct statement. I will have some questions about the 
loopholes I want to ask you about after a bit.
    Now we turn to Mr. Lynn Clarkson of the Organic Trade 
Association of Cerro Gordo, Illinois. He is the President of 
Clarkson Grain Company, which supplies organic grains, oil 
seeds, and ingredients for foods and feeds. Based in Illinois, 
Clarkson Grain Company purchases organic corn and soybeans 
directly from farmers from Texas to Minnesota, from 
Pennsylvania to the Rockies, and serves certified organic 
clients throughout the U.S. and Canada as well as parts of Asia 
and Western Europe.
    I might just add, Mr. Clarkson, the written statement that 
you have is one of the best overall recitations of everything 
that goes into organic from the beginning to the end that I 
have ever read and I appreciate it very much.

 STATEMENT OF LYNN CLARKSON, ORGANIC TRADE ASSOCIATION, CERRO 
                        GORDO, ILLINOIS

    Mr. Clarkson. Thank you, Mr. Chairman.
    Chairman Harkin. Please proceed.
    Mr. Clarkson. Good morning, Chairman Harkin, distinguished 
Senators from the Agricultural Committee. This hearing is 
focused on the challenges and opportunities facing American 
agricultural producers. In that context, I would like to talk 
to you about organic agriculture and production utilizing my 
experience in the marketplace where my company supplies corn, 
whole soybeans, soy oil, soy flours, and soy lectin. These are 
the products that come from the farmers between the mountains, 
the materials that have to be processed in some way before they 
become consumer items in general. The products that we handle 
are finding wonderful homes as ingredients in breakfast foods, 
baby foods, soy beverages, and animal feeds throughout the 
country and in some foreign countries.
    My written testimony, as the Chairman has stated, covers to 
the best of my ability every aspect of organic agriculture and 
production and points out both the great successes of organic 
with American consumers and the increasing shortfall of U.S. 
production.
    The Organic Trade Association currently studies the 
marketplace because the United States Department of Agriculture 
does not have the authority to do so comprehensively. U.S. 
organic food and beverage sales were about $14.6 billion in 
2005 and occupied about 2.5 percent of the retail marketplace. 
As the Chairman has suggested, organic is one of the fastest-
growing segments in retail, but in terms of acreage, ERS tells 
us that about one-half percent of U.S. cropland and one-half 
percent of U.S. pastureland is now certified organic, for a 
total of about four million certified organic acres in the 
United States.
    We can derive from those numbers the U.S. farmers are not 
keeping up with consumer demand for organic products. While we 
lack official collection of import data, it is pretty clear to 
those of us in this marketplace that imports are substantial 
and increasing.
    Clarkson Grain and the OTA want to enhance the ability of 
U.S. farmers to provide as much organic food, fiber, and other 
products as possible for our country. To that end, the farm 
bill is an opportunity to grow this segment.
    OTA's four 2007 farm bill objectives are: Provide technical 
and conversion assistance and cost share certification for 
farmers who are considering going organic; overcome some 
hurdles placed in the way of organic, including a lack of data 
about organic prices, markets, crops, farms, processors, and 
crop loss experience that impedes access to reasonably priced 
crop insurance and bank loans; enhanced economic and agronomic 
research from the USDA. If we try in the organic world to 
understand what the production base is, what the demand base 
is, we are often flying blind. We do not have good data on 
which to base decisions. Finally, we need to be sure that both 
USDA in general and the National Organic Program in specific 
have the resources to keep up with the dramatic growth that 
organic certification programs demand. Consumers need to have 
confidence in the label and USDA's attention to NOP, the 
National Organic Program, will ensure that fact.
    The organic community really needs parity of resources to 
build sound infrastructure as we compete in the marketplace. We 
are bringing you one of the greatest success stories in U.S. 
agriculture. We are unsubsidized. We are entrepreneurial. We 
are doing a great job in finding markets. We are not doing as 
great a job in finding adequate production. We could absorb 
without much change in price at all a doubling in the U.S. 
production base at this time.
    There are some--since I have about a minute left, there is 
one anecdote I would like to stick in about easy things that 
might be changed inside our government and structure. Senator, 
have you ever tried a blue corn tortilla chip? Well, you and I 
and most of the people in this room understand that what you 
ate was corn. There is one large organization we deal with that 
does not officially recognize that as corn and that is the 
USDA, because the USDA program, corn program, is hinged to 
definitions by the Grain Inspection, Stockyards, and Packers 
Administration on what is corn, and that is pretty much defined 
as white and yellow corn. To add insult to injury, under the 
current discount rules and damage rules, every kernel of the 
finest blue corn that I could deliver you in the world would be 
regarded as damaged.
    So it is a little difficult for an organic farmer who wants 
to participate in the SEAL Program in Iowa, Mr. Chairman, to 
participate. So there are some things that really take very 
little money, but it takes some managerial control.
    And finally, I would like to compliment the Chairman's home 
State for having done an exceptionally good job at the State 
level of supporting organic agriculture.
    So in conclusion, I and the Organic Trade Association look 
forward to working with you all on achieving great results for 
the organic industry. Thank you very much for this opportunity 
to speak to you.
    [The prepared statement of Mr. Clarkson can be found on 
page 107 in the appendix.]
    Chairman Harkin. I learn something new every day. I didn't 
know blue corn wasn't corn. I have some questions about that, 
too.
    Okay. Now we turn to Emily Jackson, Appalachian Sustainable 
Agriculture Project, a not-for-profit organization that 
supports farmers in rural communities in the mountains of 
Western North Carolina and the Southern Appalachians.
    Ms. Jackson, welcome to the committee and please proceed.

STATEMENT OF EMILY JACKSON, APPALACHIAN SUSTAINABLE AGRICULTURE 
               PROJECT, ASHVILLE, NORTH CAROLINA

    Ms. Jackson. Thank you, and thank you, Chairman Harkin and 
members of this committee, for the chance to speak with you 
today. My name is Emily Jackson and I am here on behalf of the 
Community Food Security Coalition. My purpose here today is to 
explain how the farm bill provides a strategic opportunity to 
reevaluate our current agricultural policy and to describe the 
policies and programs that farmers urgently need to stay 
profitable, to supply existing and emerging markets, such as 
what Mr. Clarkson just told us about, and to strengthen the 
small and family farms that are critical to food security and 
community vitality across America.
    I work for a non-profit organization in Western North 
Carolina called the Appalachian Sustainable Agriculture 
Project, or ASAP, and I have also been a farmer. Our 
organization supports farmers and rural communities and our 
mission is to expand regional community-based food systems that 
are locally owned and controlled, environmentally sound, 
economically viable, and health-promoting. To these ends, we 
help farmers in our region, many of whom are transitioning out 
of tobacco, connect to local markets and institutions such as 
schools and hospitals. The experiences of North Carolina 
farmers transitioning out of tobacco correlate well to any 
farmer trying something other than growing commodity crops and 
we have found that developing skills and ability to access 
local consumers and buyers has made the change easier for 
growers.
    In doing this work, there are a number of barriers that we 
have found which, if lifted, have the potential to increase the 
amount of fruits and vegetables that farmers are able to 
deliver directly to the consumers.
    In schools and the work that I do, confusion about USDA's 
rules related to local procurement means that even with 
competitive prices and desire to support local farmers in their 
region, schools are hesitant to purchase local products from 
family farms in their region. By amending the farm bill with a 
no-cost provision to state that a geographic preference can be 
used when writing a bid for school food, farmers and kids will 
both benefit. Farmers will have an increased access to a 
steady, reliable market, and the kids will have access to 
fresh, healthy food in their school cafeterias.
    Farm-to-cafeteria programs that introduce students to the 
farmers that grew their food and provide nutrition education in 
addition to the local food being served in their school 
cafeterias has been very successful in Western North Carolina 
and school systems all across the country. Funding to support 
expansion of these kinds of programs would be very helpful and 
we urge you to reauthorize increased funding for the Community 
Food Project's Competitive Grant Program.
    As I am sure you have heard from other witnesses before the 
committee, hunger, obesity, and other diet-related diseases and 
food insecurity are all rising in both urban and rural 
communities. This is, in part, a result of the lack of 
affordable access to fresh fruits and vegetables and other 
foods vital to a healthy diet. Local food producers around the 
country are an important part of this solution, but they face 
major barriers in transporting their products to market, to 
under-served markets, and other barriers include lack of 
processing, distribution, information, technology, 
infrastructure.
    Each community has a unique solution and a unique 
situation, and by supporting programs like the Community Food 
Project's Competitive Grant Program, the Value-Added Producer 
Grants, and the Farmers' Market Promotion Program, all of which 
are in existence now, you empower communities to find 
innovative solutions to their own problems which, over the long 
run, will lead to increased sustainability. These existing and 
new policy tools to provide farmers access to domestic markets 
are urgently needed and I ask that you include them in the farm 
bill with increased funding.
    For greater detail of the things that I have just outlined, 
I would like to enter for the record two recent documents, the 
``Healthy Food and Communities Initiative'' and the joint 
report by USDA and the Community Food Security Coalition, 
``Healthy Food, Healthy Communities: A Decade of Community Food 
Projects In Action.''
    [The following information can be found on pages 232 and 
240 in the appendix.]
    I thank you for your time and your leadership on behalf of 
a strong and vital food and agriculture system in the United 
States.
    [The prepared statement of Ms. Jackson can be found on page 
149 in the appendix.]
    Chairman Harkin. Ms. Jackson, thank you very much. We will 
make those a part of the record.
    Now, we will turn to Mr. Mark Brady, American Honey 
Producers Association. Mr. Brady is from Waxahuchie, Texas, has 
been a commercial beekeeper for over 30 years. He is President 
of the American Honey Producers Association, a national 
organization of beekeepers actively engaged in most commercial 
honey production and agricultural pollination throughout the 
country.
    Mr. Brady, welcome. Please proceed.

STATEMENT OF MARK BRADY, AMERICAN HONEY PRODUCERS ASSOCIATION, 
                       WAXAHUCHIE, TEXAS

    Mr. Brady. Thank you, Mr. Chairman and the members of this 
committee. On behalf of the American Honey Producers 
Association, thank you for allowing me to testify today about 
issues facing the U.S. honey industry.
    America's bees and beekeepers are having a rough time 
lately. Honey producers all across the country are seeing 
staggering bee losses from a mysterious new condition called 
Colony Collapse Disorder, or CCD. Some are losing 90 percent of 
their bees. The problem appears to be spreading and we are 
still not sure what is causing this new CCD.
    CCD affects more than honey. Over 90 crops depend on honey 
bees for pollination, including almonds, apples, oranges, 
peaches, and many others. Honey bee pollination directly adds 
about $20 billion to the U.S. farm economy each year. One-third 
of the human diet is pollinated by honey bees.
    We appreciate very much the letter on CCD that Senator 
Baucus and 43 other Senators, including many on this committee, 
sent recently to the USDA. We urge Congress to make sure we 
have the tools to defeat this serious new threat to our 
industry.
    In addition to CCD, U.S. honey producers face many other 
challenges. The numbers of bee colonies and beekeepers are 
falling at a time when demand for pollination is increasing. 
Our share of the U.S. honey market has fallen sharply. Unfair 
imports are keeping down honey prices at the same time our 
production costs are increasing. We are dealing with pests and 
diseases that are increasingly more difficult to control. We 
are concerned about the environment and effects of the new and 
existing farm chemicals on our bees. Beekeepers and their bees 
are also under great stress from the heavy demands of moving 
colonies to pollinate crops around the country.
    CCD and other problems are making it hard for U.S. honey 
producers to maintain strong bee colonies for honey production 
and pollination. As outlined in our testimony, there are a 
number of steps that Congress could take to help our honey 
industry address these problems.
    New and sustained research by the ARS labs and other 
researchers is critical in the fight against CCD and other 
threats. We recommend additional targeted funding for this 
vital work and we requested at least $1 million in new funding 
through the appropriations process for the ARS research on CCD.
    The Marketing Loan Program for honey must be continued. 
Based on recent CBO data indicating minimal or no budget 
impact, Congress should also consider raising the loan rate 
from 60 to 75 cents per pound, extending the loan term from 
nine to 12 months, and adding the reseal provision.
    Congress should provision one-time loss payments for honey 
producers suffering recent bee losses. Congress should also 
press the USDA to implement an already authorized Crop 
Insurance Program for honey producers.
    Congress must consider new ideas to encourage beekeepers to 
help the environment, such as pollination incentives and/or 
green payments. The protection of bees must be a key part of 
our environmental enforcement and approving new farm chemicals.
    Congress should look at common-sense ways to ensure that 
U.S. consumers can be sure that they are buying real American 
honey, including reasonable trade law compliance changes to 
current country of origin labeling rules.
    The current CCD crisis should be a loud wake-up call about 
the essential role that American bees and honey producers play 
in the U.S. farm economy. We must act now to prevent further 
serious damage to our industry and to make sure that we have 
healthy bees to pollinate the fruits and vegetables that are on 
our tables every day. We look forward to working with Congress 
to do this.
    Thank you very much for holding this hearing and I will be 
glad to answer any questions when you guys are ready. Thank 
you.
    [The prepared statement of Mr. Brady can be found on page 
80 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Brady.
    I guess I want to ask both Mr. Clarkson and Ms. Arnold some 
questions about the organic business here. As you both point 
out, it is expanding rapidly, but basic research and data 
collection is lacking and causing producers to make business 
decisions without adequate information. What I need to know, or 
what we need to know, is what kinds of research and data 
information would be most critical and helpful and important to 
the organic industry. What kinds of research and data 
information do we need? This question is for whoever wants to 
handle it.
    Mr. Clarkson. From the top, I think we need more 
information on markets so farmers know what the organic market 
price is.
    Chairman Harkin. Okay.
    Mr. Clarkson. States that regulate grain companies need to 
know what market prices are so they know if people are keeping 
themselves in position. And right now, we are relying entirely 
on the private sector, who is not doing a perfect job by any 
means.
    Second, we would benefit significantly from knowing well 
how many acres are certified organic and how many are coming 
onto the transition period into organic. We have recently seen 
a significant move from dairy farmers and chicken farmers 
putting animals into organic certification. I suspect that as a 
nation, we are going to run out of feedstocks before we get to 
next year's crop.
    Chairman Harkin. So what you are saying is right now, we 
get data from USDA on planting intentions. We get that early 
spring and we get another one, I think late May sometime. But 
we don't have it for organics, that is what you are saying.
    Mr. Clarkson. That is correct.
    Chairman Harkin. I see.
    Mr. Clarkson. We have no segregated information for 
organics.
    Chairman Harkin. I see.
    Mr. Clarkson. Similarly, in responding to any question you 
would ask us about what imports are, anecdotally, we can tell 
you that perhaps half of the organic soybeans used in the 
United States come from overseas.
    Chairman Harkin. Yes, I noticed----
    Mr. Clarkson. But I have no hard data to back it up because 
we don't study or we don't set aside and classify organic 
imports.
    Chairman Harkin. So while we might know the overall imports 
of agricultural products, for example, commodities, they are 
not separated out by organic?
    Mr. Clarkson. That is correct, and it is put together 
because people look at things and say, corn is corn, but 
organic markets have their own supply demand curves that differ 
from the conventional commodity markets. One may be going up 
while the other is going down and we need segregated 
information and we don't have that.
    Chairman Harkin. The other thing I wanted to cover with 
both of you is just the issue of crop insurance. Both of you 
mentioned that in your testimonies, in your written 
testimonies, and how it has not been adequate. Can you spell 
that out just a little bit more clearly for me? What do we need 
to do in crop insurance to help organic producers?
    Mr. Clarkson. The institutions that write crop insurance 
don't have good data, actuarial data on yields. They don't have 
good actuarial data on prices. They are somewhat uncomfortable 
writing the insurance. They charge an organic farmer more than 
a conventional farmer, but they only insure his crop at a 
conventional market price.
    Chairman Harkin. Why is that? If you are going to insure an 
organic crop, why wouldn't it be insured for the market price 
of what organics bring?
    Mr. Clarkson. It is a wonderful question and I wish I had 
an answer for you. I think it should be at the market price. 
When I left my office yesterday, we were probably paying $3.50, 
$3.70 for conventional corn delivered, Decatur, Illinois. At 
the same time, we were paying $6.50 to $7 for organic corn at 
the farm. And if I were going to have a risk, I would certainly 
want to insure the market value. Currently, organic farmers 
have no way of doing that.
    Chairman Harkin. Do they get a cut rate in their insurance 
premium, though?
    Mr. Clarkson. Not that I am aware of. I think they pay the 
same as the conventional farmer. They pay an extra premium, no 
cut rate.
    Chairman Harkin. What conversion assistance is needed for 
farmers who are transitioned to organic? I have heard others 
talk about this. You know, you had that 3-year sort of valley 
of death right now----
    [Laughter.]
    Chairman Harkin [continuing]. That you have to get through. 
Ms. Arnold, what would be helpful, what kind of conversion 
transition payments? Give me some idea how this might work. If 
a farmer wants to become organic or a portion of his farm or 
her farm become organic, how do we get them through that 3-year 
period of time?
    Ms. Arnold. Well, I think possibly through some of the EQIP 
funding. There could be funds specifically for some of the 
practices that would be needed for organic production practices 
that could be funded through EQIP, would be one way to do it, 
other than direct financial subsidies during that 3-year time 
period.
    And I would also like to go back to the research. Mr. 
Clarkson specifically talked more on the marketing end, but 
there is also a great dearth of research on the production end 
and there is a real need for a lot more research on developing 
seed varieties, plant varieties, and breeds that are really 
specific to the conditions under organic production, because so 
many of the seeds now are being designed and bred for chemical-
intensive agriculture and that isn't a good fit for the kinds 
of practices that organic producers have. I know a real 
impediment for a lot of dairy farmers converting to organic, 
they are so concerned, is how I am going to live without 
antibiotics and the conventional health care medications. So it 
would be nice if there could be more research on the efficacy 
of alternative health care treatments, and a lot of those kinds 
of things could also be beneficial to conventional producers, 
as well.
    Chairman Harkin. Thank you very much.
    I have a question for Ms. Jackson. I don't think you will 
find anyone on this committee who does not support in principle 
the idea of allowing schools to use geographic preference for 
the procurement of local foods. I mean, that just stands to 
reason we would all support that with our own areas, right?
    Ms. Jackson. I can't find anybody else who has a problem 
with it, either.
    Chairman Harkin. But here is the problem. The reason that 
prohibitions on local procurement currently exist is to prevent 
favoritism in contracts. So if Congress did choose to give 
local schools the authority to procure foods locally using 
geographic preferences, how can we be sure that those contracts 
are going to be fairly awarded and on some kind of a 
competitive basis?
    Ms. Jackson. Well, Senator, it is just one piece of the bid 
process. They would still--the geographic preference would just 
be one component of the bidding process. The others would be 
quality and ability to be served in the school, be able to 
serve the school system. But it is also, I would say, the 
present system, by not helping the small family farmer, 
especially in my neck of the woods--you know, our farms are 
very small due to the mountainous terrain--they are not on a 
level playing field as it is. They can't compete with the huge 
food companies now. So I would say that until that field has 
been leveled out a bit, we can't quite look to this one piece 
of a bid to say that would give an undue advantage to local 
farmers.
    Chairman Harkin. You didn't mention it in your testimony, 
but I read in your written testimony about the kids that went 
out and saw how okra was growing.
    Ms. Jackson. Right.
    Chairman Harkin. And once they saw how okra was growing, 
they went to the restaurant or someplace the next day and the 
chef made okra and they gobbled it up and ate it. So if I go 
out and watch okra being grown, will I develop a taste for 
okra?
    [Laughter.]
    Ms. Jackson. Well, if you are a child who has been given 
this great experience--it is a member of the hibiscus family, 
so children are like us. They respond to beauty, and it was a 
beautiful plant. They also respond well to food that is 
presented well and is prepared well. I think when--farm-to-
school encompasses a lot of components, taking children out to 
farms, growing school gardens. All of these experiences help to 
create this demand, and then that demand goes home. I think 
that was the point of my anecdote, was that this child went 
home and shared that enthusiasm about a vegetable such as okra 
and that was----
    Chairman Harkin. I was just joking, but I have seen that 
happen in the schools in my home State of Iowa, where kids in 
rural schools used to have gardens. They don't any longer. Now 
they go out and find out how it is growing. I have seen this 
happen many, many times and I think our schools ought to do 
more of that. Thank you very much. My time has run out.
    I will yield to our Ranking Member, Senator Chambliss.
    Senator Chambliss. Thank you very much, Mr. Chairman, and I 
promise you, if you come down South, and we are going to get 
you to Atlanta soon, we are going to give you some boiled 
okra----
    [Laughter.]
    Senator Chambliss [continuing]. Which when you eat it, you 
will never know you ate it, it goes down so quick.
    [Laughter.]
    Senator Chambliss. And we are also going to give you some 
fried okra, which I promise you will eat like popcorn. It is 
absolutely delicious.
    First of all, Mr. Chairman, let me apologize for running 
late. Just like I understand you, I got caught up in the 
traffic this morning. I don't know what is going on around 
town, but there are an awful lot more people than usual and 
they ought not to be driving, that is for sure.
    [Laughter.]
    Senator Chambliss. But I do thank you for holding this 
hearing. I have got a statement which I will submit for the 
record.
    Senator Chambliss. Ms. Jackson, let us talk a little bit 
more about these fresh fruits and vegetables because I am a big 
fan of particularly our School Lunch Programs trying to take 
advantage of that. We have had a major pilot program in the 
last farm bill that we have expanded over the last couple of 
years. My State was scheduled to be a participant in that pilot 
program, but unfortunately, during the appropriation process 
last year, we didn't complete it, but we are going to be 
working hard on that again this year.
    Senator Harkin raises a good point relative to contracting, 
but whether you contract or whether your school lunch folks 
just have the authority to go out to your local farmers' market 
and purchase fresh fruits and vegetables, we need to make sure 
that we are incentivizing those local programs to take 
advantage of our fresh fruits and vegetables that are out 
there.
    Is there anything that we should do on our end, do you 
think, to try to promote that in a different way from what we 
are doing now with the pilot program as well as the authority 
that is given otherwise?
    Ms. Jackson. Well, I think you did an excellent job in the 
2002 farm bill, it is just that things got a little confusing 
when it got to the USDA, so maybe helping the USDA understand 
what you all's original intent was in the 2002 farm bill, where 
you, I think, made it pretty clear about local procurement, 
that you wanted that to be encouraged and incentivized.
    And I am glad you brought up the Fresh Fruits and 
Vegetables Program because that is a program that has met with 
success everywhere and that actually is a program where there 
is no process--I mean, there is no penalty for local 
procurement. If you wanted to go out and get everything at your 
local Wal-Mart, you could. But that is not well known. In fact, 
I had to educate the Department of Public Instruction in North 
Carolina that that was so.
    And so I think with the Fresh Fruits and Vegetables 
Program, because that is one stellar program, that if you made 
that more clear, that there is no bid process in that one at 
all, if you made that more clear that that money, which is 
about $80 a child, which is significant money, could be used 
for local food, to support our local farmers and our food 
dollars stay in our local communities, I think that would be an 
excellent step.
    Senator Chambliss. Okay.
    Ms. Jackson. Plus, the monies that we are asking for 
through the Competitive Grants Program, that would also allow 
individual communities to come up with individual solutions 
that fit their particular agricultural climate there. Like the 
mountains of North Carolina are very different than Iowa or 
other larger agricultural areas, and so it really does need to 
be localized and solutions come from local communities rather 
than one-size-fits-all mentality.
    Senator Chambliss. My mother lives in Polk County, not too 
far away from you in Ashville, so I am very familiar with a 
bunch of local markets around that area and you grow great 
agricultural products in that part of the world.
    Mr. Clarkson, I want to go back to this issue of risk 
management and crop insurance in particular. It is my 
understanding you actually pay about a 5-percent additional 
premium for organic products to be insured under the Crop 
Insurance Program. I really don't understand why the insurance 
industry hasn't done the research necessary to develop a market 
price for your products. They obviously think there is 
something different. Otherwise, they wouldn't be charging you 
that 5 percent additional premium. So they know that your 
products are a little bit different, your quality is in a 
different category from the normal row crop operation.
    Has there been any dialog between your industry and the 
insurance industry relative to this issue, or can you give us 
any reaction you have had from the insurance community relative 
to this?
    Mr. Clarkson. Senator, I appreciate your question. I can't 
answer it in as good of detail as I would like. I would like to 
check with some people in the Organic Trade Association and get 
back to you.
    At the risk of speaking for the insurance industry, I would 
suggest they would say to me, when I raised the challenge, 
that, well, you don't have a quick chemical defense if there is 
something that goes wrong with your crop and we don't know how 
to rate that because we can't go to the USDA and get good 
actuarial data about what has happened in organic agriculture 
yet. So I think they would pass the responsibility back to our 
industry and we would come back to saying, could we get the 
USDA to assemble more information so they would have better 
data on which to base their risk analysis.
    So to some extent, it is probably legitimate to say the 
insurance industry is feeling their way into new programs, new 
protocols, but the organic production community is feeling 
somewhat aggrieved paying higher premium than a conventional 
neighbor and only being insured at conventional prices when 
their risk level is quite higher.
    So I will get back to you following this hearing with some 
more detailed information about our conversations, if we have 
had them, with the insurance industry.
    Senator Chambliss. Well, it is interesting they figured out 
a way to charge you, but they haven't figured out a way to 
develop a price for your crops.
    Mr. Brady, I am very sympathetic with the situation you 
have got in the production of bees right now and this issue 
relative to colonies dying and disappearing and what not. What 
is it both short-term and long-term that you think we could be 
doing to give you some relief short-term and long-term? Tell us 
exactly what we need to do.
    Mr. Brady. Well, one of the things, of course, is funneling 
money through USDA ARS research. One of the things we found 
with--we have four major bee labs here in the United States 
that work on these issues, and Weslaco, for instance, which is 
in my home State of Texas down there, when you look at their 
budget, by the time that they pay their in-house costs and 
their salaries and those sorts of things, there is basically no 
money left for actual research. Of course, they do hustle a lot 
of money from outside sources and grants, and as a matter of 
fact, the American Honey Producers, we just funded a study 
about a year ago in the almonds in California. We paid for 
that. The money is just not there. I understand that money is 
scarce all over, but we need to--we have got to have money to 
look at these things.
    We are also interested in some private university funding, 
maybe. Sometimes through USDA ARS and our bee labs, money sort 
of gets bogged down and doesn't always go exactly where it 
needs to go. We have got an excellent--U.C.-Davis in 
California, who is right in the Central Valley there where all 
the almond pollination goes on. A lot of critical fruits and 
vegetables come out of the State of California. U.S.-Davis is 
right there in the middle of that and we are thinking that 
probably some funding for that particular lab, maybe some new 
personnel there who could--I mean, if you look at it, instead 
of running all over the United States to look at these bee 
colonies and study them and research them, California is the 
perfect place to do it because in January and February, 90 
percent of the bee colonies in the United States are in 
California for almond pollination. So we think that is a 
perfect scenario for research and study.
    Senator Chambliss. We had somebody from the USDA in here 
either last week or 2 weeks ago testifying and I brought up 
this issue to them and I know they are on top of it, this 
particular crisis you are in right now. I am a little bit 
surprised that we are not getting a quicker reaction from them. 
I hope you will stay in touch with us literally in the short 
term, over the next several days and weeks, because I know how 
critically important, and especially this time of year----
    Mr. Brady. Yes, sir.
    Senator Chambliss [continuing]. From a cross-pollination 
standpoint and we need to figure this particular issue out.
    Mr. Brady. Yes, sir. Right now, over at USDA here in 
Beltsville, there is a 2-day meeting going on which I attended 
part of it yesterday. Lots of ARS people, USDA, as well as a 
lot of college scientists and professors are there and they are 
having a 2-day study on this thing now. We are trying to narrow 
it down and pick some key points that we need to be working on. 
But unfortunately, it is just like everything else. Without 
money, we can't do much of anything, so we have--if you look at 
our long testimony, we have got a lot of ideas that we are 
interested in looking at. I know that you guys can help us with 
this.
    Senator Chambliss. Thank you very much. Thanks, Mr. 
Chairman.
    Chairman Harkin. Thank you, Senator Chambliss. I just want 
to join Senator Chambliss in just saying that I think most, if 
not all of us, signed on the letter with Senator Baucus and 
others to urge them to really move aggressively on this issue. 
This is of the highest importance to us on this committee, I 
can assure you.
    Mr. Brady. We appreciate that letter very much. I was 
amazed. We only had a few days to get that thing done, and you 
are correct. A lot of people signed onto it. I think if we had 
another day or two, we probably would have had pretty much 
everybody's signatures.
    Chairman Harkin. I just second what Senator Chambliss said. 
I know the Department is working very aggressively on this 
right now.
    Mr. Brady. Yes, sir.
    Chairman Harkin. The line-up that I have for order of 
questioning will be Senator Thune, who stepped out, and then 
Senators Klobuchar, Salazar, Stabenow, Crapo, Conrad, Lincoln, 
and Senator Craig is here, I know, to introduce the next panel 
as soon as we get through with this line of questioning. So I 
would recognize Senator Klobuchar.
    Senator Klobuchar. Thank you, Mr. Chairman. Thanks for 
holding this hearing. I welcome all our witnesses, and on the 
third panel, and I am not sure if I am going to be back from my 
other two hearings, there is going to be a Minnesota witness 
and I wanted to welcome him, Clint Fall, who is the President 
of the First District Association, which is a dairy processing 
co-op headquartered in Litchfield, Minnesota. As you are going 
to hear from Clint, the MILC Program created in the last farm 
bill has been a life-saver for our dairy farmers in the upper 
Midwest, and by providing assistance only when prices are low, 
the MILC Program has effectively targeted Federal dollars to 
help farmers survive tough times.
    I also met this weekend with a number of sugar beet 
producers and I just wanted to mention, Mr. Chairman, that the 
sugar program operates at no net cost to the taxpayers and they 
want to see it continue. We had some very good meetings out in 
Breckenridge.
    Finally, I wanted to talk a little bit with you, Mr. Brady, 
about the honey issue. I was out in Ortonville at a breakfast 
yesterday and there were some beekeepers there talking about 
exactly what you talked about. They are very concerned. They 
have lost a large number of their bees. There were a lot of 
theories going around about why this was happening, especially 
at the Econolodge where I was in the morning. Someone mentioned 
cell phones, someone talked about pesticides. There was just 
all over the place.
    I just wondered if you could go through, to follow up on 
what Senator Chambliss was asking you about, what some of the 
theories are and if you have any beliefs in addition to some of 
the research you talked about with him. What do you think would 
be the best thing we could do about this quickly, because they 
are very concerned not only in the effect on their own 
businesses, but the effect on other crops.
    Mr. Brady. Yes, ma'am. I appreciate your interest. On the 
cell phone issue, we took all the phones away from the bees, so 
we addressed that immediately.
    [Laughter.]
    Mr. Brady. But the CCD is basically just a name that was 
given for what I believe has been an ongoing problem for the 
last few years. One of the things that we are looking at really 
close right now is when EPA approves pesticides, what we have 
historically done is approved that based on the fact that it 
didn't kill bees immediately. So one of the things that we are 
looking at really hard right now is a cumulative effective of 
pesticides. As bees work during the summer, whatever crops they 
may be working on, they pick up pollen and they pick up nectar. 
Both of those are stored inside the hive, and in a lot of 
cases, that pollen and/or nectar is not used or consumed until 
wintertime.
    So I guess what I am--some pesticides are a contact kill, I 
would say, so you can go out and you can see evidence where the 
bees have dropped dead because they got poisoned for one reason 
or another. But one of the things we are looking at is the 
cumulative low doses of pesticides that buildup in the hive. 
Your hive survives all summer long, but when the honey flow 
shuts off, when the weather turns cold, and then the bees are 
forced to consume what they have got inside the hive, that is 
one of our big concerns, that there may be some pesticides 
stored up inside that pollen. Low doses, sub-lethal doses that 
we haven't been concerned about before, we are beginning to 
wonder now if maybe that is causing a delayed effect on some of 
these colonies dying.
    The stress factor is something that we need to look at. I 
know it is hard to believe that bees would be under stress, you 
know. They seem to be the happy go lucky, out there working, 
having a good time. But things are so much different now. We 
continually shift these things all over the country. Almost 
every hive in the United States goes to California for almond 
pollination. The stresses on those bees are getting more and 
more because of more food production. Almonds, for instance, 
they are basically--California grows 100 percent of the U.S. 
supply of almonds, so all the colonies have to go to California 
to pollinate out there.
    We are looking at fungicides. We are looking at 
insecticides. We are looking at stress. There is just a wide 
variety. I just came from the meeting over at USDA and it is 
going to be a good meting. There are a lot of good minds over 
there and everybody is putting in their ideas and we are going 
to try to narrow it down and pinpoint what this may be.
    Senator Klobuchar. Thank you very much. I have some 
questions of you, Ms. Arnold. In your testimony, you mentioned 
the need for financial assistance for organic farmers to go 
through the certification process.
    Ms. Arnold. Well, that wouldn't really be for the organic 
farmers. It would be for conventional farmers.
    Senator Klobuchar. To go through the certification, all 
right. And a recent survey in Minnesota showed that half of our 
organic farmers paid between $300 and $750 for certification 
and two respondents paid $2,500 or more. Can you shed some 
light on these costs and why they are so high?
    Ms. Arnold. Annual certification, is the process that we 
have to go through each year to maintain our organic 
certification. When I send our application in, it is probably 
half-an-inch thick of paper. We have an inspector come. He 
spends almost all day viewing our farm and then this half-inch-
thick paperwork has to go into the certification office. They 
do data entry and review.
    It is just a lot of work, a lot of man hours that go into 
the certification process, and then the certifiers have to be 
accredited by the USDA every 5 years, and currently, the second 
round of accreditation is happening. The first one, I think, 
was financed by the government. The second one is being 
financed by the certifiers, and they are being charged $107 an 
hour per USDA personnel who is in the office, plus travel time. 
So many of these certifiers are going to have a $15,000 bill or 
more to get reaccredited this year, and that has got to be 
passed down to all the farmers. For our farm itself, we pay, I 
think, about $2,800 a year to be certified.
    Senator Klobuchar. Thank you.
    Ms. Arnold. You are welcome.
    Chairman Harkin. Next, we will turn to Senator Salazar.
    Senator Salazar. Thank you very much, Chairman Harkin and 
Ranking Member Chambliss. Chairman Harkin, thank you, as well, 
for the hearing being held in Brighton, Colorado, not too long 
ago where you saw the great diversity of specialty crops and 
organics that people came to testify about. My own family has 
been involved in agriculture for many centuries and we today 
produce potatoes in Colorado and it is now, I think, the third-
largest crop that is produced within our State. So I am 
appreciative of the fact that you are paying attention to 
specialty crops and organics as we move forward toward the farm 
bill, so thank you very much.
    I also wanted to say thank you to Senator Stabenow and 
Senator Craig as they move forward with legislation on 
specialty crops. It was legislation that I cosponsored last 
year and look forward to taking a look at the bill that they 
have introduced this year.
    I have a question for you, Mr. Clarkson and Ms. Arnold. Mr. 
Clarkson, you sent forth a vision that you say we ought to be 
able to double the amount of organic production that we have in 
this country and you talk about the disparity that we currently 
have between the amount of organic production that we have and 
the demand that we have out at Wild Oats and places like that 
that sell organics. For you and Ms. Arnold, I guess I would 
ask, if you were to do the top two things to enhance the 
organic agriculture industry here in America, what would those 
two most important things be?
    Mr. Clarkson. Do you want to go first?
    Ms. Arnold. It is hard to pick. I would think----
    Senator Salazar. You gave us, I think, ten----
    Ms. Arnold. Seven, yes. I would say increasing the research 
to reflect the amount that organic is of the market. Right now, 
I think organic research, specific research, has point-six 
percent of the Federal dollars versus the actual marketplace 
that organic is almost 3 percent.
    Second--it is so hard to choose because there are many 
needs and some of them require dollars and some of them don't--
can you go with your first----
    Senator Salazar. You can stick with your seven, Ms. Arnold.
    Ms. Arnold [continuing]. And I will come up with a second.
    Senator Salazar. We have your seven. How about you, Mr. 
Clarkson?
    Mr. Clarkson. My personal priority here is the integrity of 
the entire organic movement rests on the integrity of the seal. 
We as a nation have funded a National Organic Program which 
lives inside the Agriculture Marketing Service, which lives 
inside the USDA. It is a small band of people--I think they 
number less than nine--and they have an entire new market 
sector to regulate, enforce the rules in, define new 
definitions as they come up.
    So this is really just a request for good government. The 
classic role of government is to enforce the rules, certify the 
certifiers, and help develop the law that they are custodians 
of. I don't believe there are enough people, I don't believe 
there is enough funding for them to do their job adequately, 
and I think that is a foundation issue for our entire industry.
    Ms. Arnold. Yes. I would totally agree with that, and that 
is not a farm bill issue, so I wasn't thinking of that, but 
absolutely. That is why this pasture issue, or at least that is 
why USDA is saying this pasture issue has not been taken care 
of, because they only have eight people in the office and they 
have so many responsibilities and their budget is an annual 
appropriation thing, not a farm bill issue. But yes, having the 
staff and the ability to keep the program going and oversee it 
and keep the integrity there is absolutely a crucial thing to 
organic agriculture.
    Senator Salazar. So what both of you would say, making sure 
we beef up the USDA operation with respect to organics and 
putting a focus on that within USDA would be very helpful.
    Let me ask you as a follow-up to that question, we have 
received lots of testimony from Secretary Johanns and USDA with 
respect to organics and specialty crops. What is your view of 
the administration's proposal with respect to organics and also 
your view in terms of what they have said or what their 
proposals are relative to the functioning of USDA with respect 
to organics?
    Mr. Clarkson. I don't feel competent to respond directly to 
your question because I am not that knowledgeable about what 
the administration is proposing on this. If I might, I would 
like to follow up on your other question, because I only gave 
you----
    Senator Salazar. Go ahead.
    Mr. Clarkson.--I only gave you one answer. The second 
answer to your question is really a linked one. It goes to the 
insurance for organic farmers so they can cover their risks so 
their lenders will be happy to finance them. But I don't 
believe that that is going to work until we have better data, 
which goes back to authorizing the USDA to collect, or the 
various government agencies to collect import-export and then 
the Agriculture Department collects production and marketing 
data so that the insurers can be nudged into more reasonable 
insurance for the organic community. Those would be my two-and-
a-half key points.
    Senator Salazar. Ms. Arnold?
    Ms. Arnold. Yes. I am not all that familiar with the 
USDA's, or the President's and Johanns's points on organic 
agriculture, although I do believe that their proposal for 
organic research was actually a decline and not an increase. So 
I would say that is absolutely off base.
    Senator Salazar. Do you think that we ought to have a 
separate title in the farm bill that deals with organics?
    Ms. Arnold. I am not sure that that is necessary. I think 
organic agriculture can be fit within existing titles.
    Senator Salazar. Mr. Clarkson?
    Mr. Clarkson. At the Organic Trade Association, that has 
come under discussion. I have been party to some of the 
discussion, certainly not all. It seems to us that we can fit 
the organic requirements inside the existing structure. We are 
thinking that a new title would be unnecessarily complicating 
and perhaps setting up new communications paths inside the 
administration that are difficult to do, difficult to regulate. 
So we would look forward to trying to work within the current 
structure without a separate title.
    Senator Salazar. Thank you and also the rest of the 
witnesses for your excellent testimony this morning.
    Ms. Arnold. Thank you.
    Mr. Clarkson. You are welcome.
    Chairman Harkin. Senator Thune?
    Senator Thune. Thank you, Mr. Chairman. Thank you for 
holding another in a series of hearings that are so important 
to this farm bill. I know that part of the farm bill discussion 
is going to include the topic of today's hearing, which is the 
important role that fruits, vegetables, and specialty crops 
play in our agricultural industry. And in fact, the sales of 
those crops constitute a third of U.S. agriculture cash 
receipts, and the figure rises to 50 percent when nursery and 
other specialty crops are considered.
    So as we will hear today, I think, challenges facing the 
fruit and vegetable industry can be met by effective public 
policy and it is a tight budgetary atmosphere and the members 
of this committee are going to have to work together to 
allocate resources in a fair and equitable manner that provides 
a safety net for our producers and a reliable food supply for 
our nation. So I appreciate all those who are testifying today 
and the perspective and the insight that you give us as we 
begin this important work of getting a new farm bill put 
together under what are some interesting budgetary and 
international trade constraints.
    I have a couple of questions tying back to--I want to come 
back to some of the questions, the line of questions that has 
been raised earlier with regard to the bee situation, the 
honey. Mr. Brady, if you could describe--I know you have 
already answered in some degree questions with regard to what 
is causing this, but can you tell me that based on known 
current losses what impacts CCD is going to have on the 2007 
honey crop, on 2007 pollination needs, and what will be the 
long-term repercussions if this disorder is not addressed?
    Mr. Brady. I believe as far as the 2007 honey crop and 
pollination, I believe at this point that--some of the things 
that are happening in the industry, myself, for instance, we 
are increasing the number of colonies that we are running. A 
lot of the smaller outfits have just not been able to maintain 
profitability so they have gone out of business. So our colony 
numbers have gone down, but some of the rest of us are trying 
to pick up the slack and increase our numbers so that we have 
an adequate amount of bee colonies for pollination.
    Honey production, it is going to suffer any time you lose 
the amount of colonies that we have lost last fall and this 
winter. We can rebuild those numbers, but in the process of 
rebuilding them, it also weakens your good, strong, established 
colonies, which therefore in turn cuts down on your honey 
production for that particular year.
    I believe with the proper research--I believe if nothing is 
done, we are going to be in a very serious problem. California 
almonds, for instance, I always use that example because it 
takes over a million hives of bees to pollinate that almond 
crop out there. Projections for 2010, 2012, it could take up to 
1.5 to two million colonies of bees to be able to pollinate 
that crop. So we have got to make some increase in our numbers. 
We have got to get these things built back up, but it can be 
done. It can be done through the proper research. We have got 
good beekeepers out there that are not going to give up. You 
know, the health of that honey bee is going to be critical to 
maintaining these numbers.
    Senator Thune. In your opinion, has USDA effectively 
utilized its available resources to assist beekeepers with this 
problem?
    Mr. Brady. That is a tough question. USDA has done us a lot 
of good, but I believe that the last four to 5 years, they have 
been lacking on some of the research, and I am not pointing any 
fingers or blaming anybody. It is probably a money problem. 
There is only so much money to go around, and like I said, a 
lot of the funding for these labs, they are so underfunded that 
it has taken most of the money just for administrative costs, 
salaries, those type things, and the money is just not there 
for the research. We are so far behind on bee research, it is 
just unbelievable.
    That is one of the reasons I am leaning toward University 
of California at Davis. I am thinking possible some of these 
private universities might be able to lend a hand and maybe do 
some more specific work on some of these problems that we are 
facing.
    Senator Thune. Are there steps that Congress ought to be 
taking, do you think, in your opinion?
    Mr. Brady. Only on the money side, you know. Of course, we 
are trying to get crop insurance. We have never had crop 
insurance. There is a proposal on the table and I think it is 
kind of ridiculous, really, that all of these crops that we 
pollinate, that we don't have any crop insurance for our sale. 
I know it is going to be a really tough thing to do. We are 
working on it. The numbers are not really good because so many 
beekeepers jump from one State to the next, it is hard to come 
up with good numbers on production. We are looking right now at 
maybe using grower income numbers, those kind of things, to 
make a better base for some crop insurance.
    Of course, the loan program is vital for us, especially 
with all the imports that are coming in. The loan program is at 
60 cents right now. We would love to see it go to 75, but our 
biggest concern is to maintain it. This is a really good 
marketing tool for beekeepers.
    And pollination and honey both go hand-in-hand. We are not 
going to have one without the other. Some people say, well, 
just don't worry about the honey, just pollinate, but you can't 
keep these bees healthy without keeping them on a honey flow. 
So there has got to be some honey production in there, as well.
    Senator Thune. I appreciate that and I would just say, in 
my home State of South Dakota, we don't produce a lot of fruits 
and vegetables, but we are one of the nation's largest honey 
producers.
    Mr. Brady. Absolutely.
    Senator Thune. We are, I think, fourth largest honey 
producing State and over ten million pounds of annual honey 
production. And you add to that the fact that the bees are 
transported around the country to pollinate several other 
different varieties of fruits, vegetables, and specialty crops, 
this is a very, very important issue to my State, and in South 
Dakota and several other States around the country, we are 
losing 40 to 60 percent of their hives.
    So I appreciate your testimony. I know from what you said 
earlier that some producers are experiencing losses as high as 
90 percent, so----
    Mr. Brady. Yes, sir.
    Senator Thune [continuing]. This is going to have an 
immediate impact on the economic well-being of our honey 
producers and we want to do everything we can to assist in 
coming up with workable solutions and welcome, as always, your 
input in that regard. I know that I will be hearing from my 
honey producers in South Dakota.
    My parents were in the honey business for one summer back 
in 1961. It was a dry, hot summer, as is typically the case in 
South Dakota. It was not a good year for honey production, but 
I am told that I got a bee sting that year which they were 
worried I wasn't going to make it. So we have a little personal 
experience with this, but I have great respect and regard for 
the people in my State of South Dakota. They are very hard 
working and we want to make sure that they have the tools in 
place that allow them to continue to be prosperous and 
contribute to the many needs of production across the country.
    So thank you for your testimony, and Mr. Chairman, I look 
forward to working with you to address these important issues. 
Thanks.
    Mr. Brady. I appreciate it very much.
    Chairman Harkin. Thank you, Senator Thune.
    I now will turn to Senator Stabenow.
    Senator Stabenow. Well, thank you, Mr. Chairman, for this 
important hearing. We have three excellent panels today and 
welcome to each of you.
    First, I appreciate the comments regarding the Fresh Fruits 
and Vegetables Program. We have all worked so hard on that, and 
part of the reason that we want to add a new title of specialty 
crops in the farm bill is to also help our organic farmers. It 
is very much a part of what you are doing. The more we expand 
into fresh fruits and vegetables for all of our Commodity 
Purchase Programs, our nutrition programs, I am assuming that 
is a very positive thing for each of you, so we hope to be able 
to do some significant things in the farm bill.
    Mr. Brady, I wanted to ask you a question, as well. I know 
there is a lot of interest as it relates to bees these days, 
and not only directly for the industry, but the environment and 
just the broader issues that surround the need to have a 
healthy bee industry.
    I wondered if you might speak about the unfair trade 
practices you talked about earlier. We know that what happened 
with China and the fact that we were able to do anti-dumping 
protections and then change the loopholes that China was using 
to be able to address the concerns regarding the unfair dumping 
coming into this country. But I wonder if you might just speak 
a little bit more from a trade standpoint, and I would welcome 
any other panelists who have had issues related to trade 
practices as we work to level the playing field and make sure 
that we are truly enforcing the laws so that our producers and 
businesses in the United States have full opportunity to 
succeed.
    Could you speak about, a little bit more about the unfair 
trade practices? It looks like it is getting a little better, 
but maybe not----
    Mr. Brady. It is getting better. Closing the loophole was a 
tremendous help for us. It took us a while to get it done, but 
you guys got it done and we appreciate that. You know, the 
Chinese are very energetic people and every time we plug one 
hole, another hole opens up.
    Right now, one of the things that we are facing is what we 
call a Baker's Blend. There is over a million pounds a month 
coming in right now and we are in the process of doing some 
sampling to see if it is a blend of other sugars and honey or 
if it is pure honey and they are trying to come in under the 
radar as far as our tariffs are concerned under the anti-
dumping.
    It is really tough when you look at the packers here in the 
United States, and I am not blaming them. They are there to 
make money, as well. But we are competing with China on a basis 
that there is just no way. They are selling honey over here 
still way below what our cost of production is. We just--you 
know, in my particular case, I have got a few packers here in 
the United States that pack 100 percent domestic honey and I 
really appreciate them for that. We hold honey all year long 
for them in the warehouse and sell it to them a little bit at a 
time. But when you are forced onto the open market to try to 
compete with China, you can't do it. There is just no way.
    The new shipper legislation helped us a tremendous amount. 
Like I said, now, they are coming in with what they call a 
Baker's Blend. We are not sure what it is. We are working on 
that to find out whether they are just dodging the anti-dumping 
laws or whether it is a labeling issue.
    We are trying to get a standard of identity for honey, as 
well. What is pure honey? We are working on that through USDA. 
So there is quite a few things in the process right now, but 
the imports are--I have some numbers here just real quick. Our 
share of domestic honey sales in 2006, 31 percent of the honey 
that was sold in the United States is domestic honey. In 2005, 
it was 38. In 2004, it was 46. So you can see that even with 
the things that we are doing, our market share is shrinking 
every year. Now, part of that can be attributed to a smaller 
honey crop here due to CCD and those particular things. Our 
2006 crop was about 155 million pounds, which is down over 50 
million pounds from our average crop.
    But our market share is shrinking, and so we really--one of 
the things that we are working on is a U.S. Domestic Honey 
Board. USDA has got that information now and we want the 
consumer to be able to know what they are buying. We are 
working on labeling laws. When you go in and buy a jar of honey 
at HEB or wherever, it may have a country of origin label on 
there that has got ten different countries on there. You have 
no idea where it came from, none whatsoever.
    Our current marketing board, National Honey Board, can only 
promote honey generically. They are not allowed to promote USA 
honey. So we are in the process of trying to come up with a 
USA-only Honey Board that will promote USA honey only and----
    Senator Stabenow. Would you repeat that again, that they 
don't promote U.S. honey?
    Mr. Brady. Yes, ma'am----
    Senator Stabenow. Go back on that again, would you?
    Mr. Brady. Our existing National Honey Board can only 
advertise or promote honey generically. They can't push U.S. 
honey one way or the other, and that is just the way it was set 
up. So it is very important to us now to get this U.S. Honey 
Board that we are working on, get it in place. It will be able 
to promote U.S. honey, as well, so people know the difference.
    Constantly, I have people coming up to me and they say, why 
does the honey that I buy in the store, why doesn't it taste 
like the honey that we get from you, and the simple reason is 
some of it is junk. A lot of it is blended to bring the price 
down. We just want them to realize that there is a good, pure 
USA product out there that they can buy, and this new Honey 
Board that we are working on will help us do that.
    Senator Stabenow. Absolutely. Thank you very much.
    I don't know if anyone else--Mr. Clarkson?
    Mr. Clarkson. Senator, depending on the breadth of your 
question, the organic community has run into trade obstacles 
serving clients in countries such as Korea over GMO issues. The 
Koreans have adopted the world's most restrictive attitude 
toward genetically engineered trace. Their tolerance level 
officially is zero, which is an impossible standard.
    We have known a number of organic companies that have just 
quit shipping because they don't believe they can ever meet the 
zero standard. We have noticed others that have continued to 
ship and they have had their containers stopped and after two 
to 3 weeks, they seem to go in, which would suggest to me that 
there is an informal rule, as well as a formal one. But no 
company wants to subject itself to the risk of being stopped by 
the formal rule.
    So this is a situation on which I know the USDA is engaged 
in negotiations. The Koreans bring their own difficulties to 
the trade table and I would wish our negotiating parties good 
luck at the next session. But that is an increasing problem for 
the organic world, being tainted with any trace element of GMO. 
Most countries are more liberal than the Koreans.
    Senator Stabenow. Thank you very much, Mr. Chairman.
    Senator Chambliss. [Presiding.] Mr. Clarkson, do you know 
whether or not that issue was addressed in this most recent 
bilateral with South Korea?
    Mr. Clarkson. I absolutely do not, sir.
    Senator Chambliss. Okay. Senator Lincoln?
    Senator Lincoln. Thank you, Mr. Chairman. Both of my 
questions actually go to the issues that Mr. Clarkson brought 
up and also with the honey issue.
    Mr. Brady, I appreciate your testimony and seem just as 
shocked as Senator Stabenow that we can't promote domestic 
honey. Maybe there is a way--I don't know about the rest of you 
all, but with the amount of pollen that is in the air right 
now----
    [Laughter.]
    Senator Lincoln.--I have always been told that if you use 
not only domestic, but more importantly locally produced honey, 
that it will definitely lessen your effects with allergies and 
with the pollen that exists in your local area, so maybe we can 
use it for that purpose, promoting locally produced honey on 
behalf of all of us that suffer from allergies.
    Mr. Brady. Yes, ma'am.
    Senator Lincoln. I certainly would like to look at those 
types of exceptions, but I think it is so important that we 
maintain our domestically produced honey.
    Arkansas is not one of the top honey-producing States in 
the country, but we do have a number of commercial producers 
and certainly some hobbyist beekeepers. It was one of the first 
things, when my Mother and Daddy married, my Dad started 
beekeeping. It was one of the things that they loved doing 
together and it was a wonderful hobby for them and something 
that they enjoyed.
    When you talk about the Baker's Blend and you talk about 
these trade issues, you have elaborated, I think, on some of 
the challenges. We were delighted in that pension bill to be 
able to get the new shipper's review and do feel like it has 
been helpful, but obviously, as you said, they are going to 
find other ways around that, whether it is labeling or the mis-
labeling of those imports, blending or tainted imports that we 
are not aware of. What about transshipments? Has that been an 
issue, as well?
    Mr. Brady. It has been an issue, and by closing the 
loophole, it makes it more of an issue. But the transshipments 
going through other countries, whether it be Mexico or Taiwan 
or wherever it might be, we do a fairly good job of monitoring 
that. We have a good law firm here in Washington that takes 
care of some of those issues through ship manifests and those 
type things, and we are also able now to identify honey through 
sampling.
    Chinese honey has certain qualities, certain ingredients in 
it that we don't have in U.S. honey. So we can--it is sort of a 
fingerprint issue. We can tell where some of those honies are 
coming from. Not too long ago, we actually caught a couple of 
loads in Canada that had come in from China and they tried to 
come in through Canada and market as Canadian honey, so Customs 
was able to catch that. So that is an issue, but it is 
something that we have a fairly good handle on.
    One of the things that is keeping prices down right now is 
while we were waiting on getting this new shipper legislation 
passed, there was a tremendous amount of honey that just 
flooded into here, and the Chinese knew that we eventually were 
going to get it passed, so they took advantage of it and a lot 
of these packers, they are just stockpiled up. Once those 
supplies go down some, I think we will see a good result from 
the new shipper loophole.
    Just for your information, Arkansas, I sell a lot of honey 
to Fisher Honey Company in Arkansas. They are an excellent 
company and they buy a lot of domestic honey, so I appreciate 
that.
    Senator Lincoln. They are a good company, and it is 
important. I know not only do I appreciate it as an industry, 
but as a consumer----
    Mr. Brady. Yes, ma'am.
    Senator Lincoln [continuing]. With two boys that eat plenty 
of honey on their oatmeal and plenty on their biscuits, it is a 
great way, it really is, in terms of allergies and stuff, if 
you can get it domestically and particularly locally, which I 
do.
    Mr. Brady. Yes, ma'am.
    Senator Lincoln. Ms. Arnold and Mr. Clarkson, just to touch 
a little bit on your testimony pointing out about the organic 
producers, what they face when their crops are unknowingly 
contaminated, particularly Ms. Arnold, with the genetically 
modified material, this has been a tremendous problem for our 
rice growers in Arkansas and our rice producers and they are 
facing it right now, as well, as you may well know, with the 
multiple circumstances they have dealt with.
    Maybe you could elaborate on some steps that you believe 
Congress could begin to take to help mitigate some of the 
losses that farmers are experiencing. We are finding certainly 
that the losses our rice growers are experiencing is tremendous 
in terms of what they are producing that is contaminated, but 
then they are also becoming skittish because--I mean, the seed 
crops for these crops started in 2003, so knowing what kind of 
seed they are getting from the dealers, it may have been 
certified by USDA and yet still they are finding those traces 
in there. Our farmers are finding that they are not getting 
much help from USDA in terms of losses of what they are 
experiencing. Maybe you can----
    Ms. Arnold. Right. Well, this is definitely an issue that 
cuts across. It isn't just an organic issue, but many 
conventional producers also need GMO-free commodities for their 
markets. I would say it is not the responsibility of the 
taxpayers to cover these losses that producers are suffering, 
but it should be the responsibility of the manufacturers who 
are making the profit on these seeds to be the ones that pay 
the farmers and the processors who are experiencing these 
financial losses. So I am not exactly sure what kind of law 
could be put into place, but that is where the responsibility 
should squarely lie, on the shoulders of the manufacturer.
    Senator Lincoln. Well, it is interesting, because when we 
talk to those particularly in the scientific field that are the 
ones experimenting with these things, they tell us it is not 
their responsibility because this is not their product. They 
are just doing the scientific research there and that the 
product belongs--and, of course, as you said, the manufacturer 
of the product is saying, well, it is not our research, it is 
their research that is causing the problem----
    Ms. Arnold. Right.
    Senator Lincoln [continuing]. And maybe perhaps their lack 
of sophistication in keeping that research contained. And, of 
course, USDA is responsible for the review and making sure that 
there is oversight of all of this. And all three of those throw 
up their hands and say, well, it is not our responsibility, and 
yet our farmers are the ones that end up with the loss, so----
    Ms. Arnold. Exactly.
    Senator Lincoln [continuing]. We would certainly love to 
work with you to come up with something that helps our farmers.
    Ms. Arnold. And I think the other point is that the farmers 
that are purchasing the seeds and growing the crops, they 
actually are, I believe, they are only renting the seeds and it 
is the manufacturer who retains all rights----
    Senator Lincoln. Oh, absolutely.
    Ms. Arnold [continuing]. So that is absolutely where the 
responsibility lies.
    Senator Lincoln. And it costs them an awful lot to not be 
able to manage their own seeds from year to year, and I hear 
regular complaints about that.
    Mr. Clarkson?
    Mr. Clarkson. Senator, the issue in the rice world comes 
critically from a company introducing a genetic trait that was 
not approved in the United States, let alone in foreign 
countries. I think it would be appropriate for us as a nation 
to not allow the introduction and open production in the great 
outdoors of unapproved genetic events. That is using the U.S. 
farmer as the infantry in a battle that is not his----
    Senator Lincoln. Right.
    Mr. Clarkson [continuing]. And really damage him.
    Second, if people are going to introduce new traits, those 
of us who have to test for traits when we see things coming 
into elevators and moving into commerce would love to have some 
sort of genetic signal that we can pick up when we are testing 
rather than have to go to link the analytical labs, where we 
may not get the results for a week and it costs us a thousand 
dollars to find out what is inside that crop.
    Senator Lincoln. Well, go back 10 years in research, which 
is what they are doing, and you are right, I mean, not being 
able to test at the elevator.
    Mr. Clarkson. We are not saying no to genetic engineering. 
We are not saying no to development of new traits. But we are 
thinking that it would be very appropriate for us to regulate 
the introduction of those traits better than we have done as a 
nation.
    Senator Lincoln. Thank you, Mr. Chairman.
    Senator Chambliss. Senator Casey?
    Senator Casey. Senator Chambliss, thank you very much, and 
I want to thank you and Senator Harkin, our Chairman, for 
calling this hearing. I want to accomplish two things. I have a 
couple of questions for this panel, but I do want to preview 
the next panel because there is a Pennsylvanian on that panel 
that I want to say hello to.
    John Rice from Adams County, Pennsylvania--I didn't see 
John when I came in, I don't know if he is--John, thank you 
very much for being here. I am going to brag about you for 
another 20 minutes, no more.
    [Laughter.]
    Senator Casey. No, I want to welcome John. He is, as I 
said, from Adams County, Pennsylvania, the county of Gettysburg 
and so much history, but also a county that produces a lot of 
apples. John is an apple grower and packer and he will be 
giving us his perspective today on specialty crops.
    I do want to mention for the record Russ Redding, who is 
from the Pennsylvania Department of Agriculture, was scheduled 
to be here this morning, but he had a medical emergency and 
can't make it, so Mr. Chairman, I would ask unanimous consent 
that Mr. Redding's written testimony be made part of the record 
and that members of the committee be allowed to submit 
questions to Mr. Redding for the record. That would be a very 
important part of the record.
    [The prepared statement of Mr. Redding can be found on page 
205 in the appendix.]
    Senator Casey. But just for the record, I wanted to make 
sure that we highlighted some of the aspects of Pennsylvania 
agriculture. We have got, obviously, a lot of dairy farmers in 
Pennsylvania. Specialty crops and dairy represent the majority 
of Pennsylvania agricultural products. As Mr. Rice knows, we 
grow everything from apples and mushrooms to peaches and more 
mushrooms in Pennsylvania. We also have a lot of nursery stock 
in our State and a good deal of floriculture, which is 
sometimes forgotten when we talk about specialty crops.
    We are way up there on the ranking of dairy States. But 
unfortunately, just recently, this past month, I guess it was, 
in March, we went from fourth to fifth in dairy production. 
Senator Crapo's State of Idaho, has now passed us out, and that 
highlights the problem we have in Pennsylvania.
    Basically, as everyone here knows if you know anything 
about dairy farming, is that our farmers are not getting the 
price that it costs to produce the milk that they are 
producing. In fact, farmers in Northeastern Pennsylvania, which 
is the corner of Pennsylvania where I am from, they are losing 
$5 on every hundredweight of milk that they produce. So in many 
ways and in large measure, the future of Pennsylvania 
agriculture depends upon the decisions we make in this year's 
farm bill for dairy and specialty crops.
    I think we also must assist specialty crop growers with 
programs for marketing research and export, and I know the new 
farm bill must include a new Federal dairy program that works 
for Pennsylvania farmers by taking into account that cost of 
production.
    So I look forward to hearing from the witnesses today. I 
missed the opening testimony from the witnesses before me.
    Let me just quickly get two questions in, if I can. I guess 
the first, I would direct to Kathie Arnold. Your testimony, 
which I missed but I have the written version of it, and I 
especially respect what you do as a family. I know in your 
testimony it mentions your husband, Rick, and his brother, Bob, 
and the family aspect of it and that is certainly true of 
family dairy farms in Pennsylvania. I can't imagine what you do 
every day just to make ends meet and I appreciate that.
    But we know that certified organic label certainly plays a 
huge role in any success that you or others have, and I know 
that as part of your testimony, you said that the labeling 
program should be updated to reflect that increased cost in 
funding needs. I guess the basic question I have for you is, do 
you have an estimate as to how much this update would cost? And 
you may have already answered this, you may have been through 
it, but I just wanted to have this for the record if that is 
available to you, if you know it.
    Ms. Arnold. Yes. What you are referring to, I think, is the 
National Organic Certification Cost Share Program----
    Senator Casey. Correct.
    Ms. Arnold [continuing]. Where producers can get up to, 
currently up to $500 reimbursed on their certification costs 
and we are asking that it be moved up to $750 because of these 
increased accreditation costs of the certifiers. What we are 
asking for is $25 million for a 5-year farm bill for the 
certification cost share.
    Senator Casey. Thank you very much.
    Ms. Arnold. You are welcome.
    Senator Casey. And I appreciate the work that you do. I 
know I am short on time, but I also wanted to ask one question 
to Ms. Jackson, part a commentary and part a question.
    I appreciate the fact that you highlighted something in 
your testimony where you introduced this paragraph by saying, 
we have heard this from other witnesses. Sometimes that is the 
case, but sometimes it doesn't matter because it bears 
repeating and emphasis because of what you have in there.
    I was struck by this statement. Hunger, obesity, and other 
diet-related diseases and food insecurity are all rising in 
both urban and rural areas, and then you talk about the 
challenge that local food producers have in terms of 
transportation and other costs and you talk about the programs 
that we are discussing as part of this farm bill, including the 
Community Food Project's Competitive Grant Program, the Value 
Added Producers Grants, the Farmers Market Promotion Program. 
And then you say by using those programs, you empower 
communities to find innovative solutions to their own problems.
    First of all, I want to commend you for highlighting the 
challenges that real people face. Sometimes we get a little 
lost here. We talk about programs and budgets and numbers, as 
important as that is and as essential as that is, but we forget 
the impact sometimes and the urgency that is a part of this 
farm bill to impact people's lives in a positive way. These 
challenges, whether it is hunger or obesity or other health 
problems that families have, and especially children have, are 
not limited to one party or one region of the country, and I 
appreciate the fact that you highlighted that.
    I don't know whether you have a comment about some of those 
costs and some of those burdens that people face in those 
situations.
    Ms. Jackson. Of course, I do. I think we have a strange 
phenomenon in this country where we have people who are obese 
and malnourished at the same time. I like to say it is a 
proliferation of cheap nasty food. It used to, when people were 
poor, they had a garden to rely on and so they got fresh whole 
foods and they had clear access to that. And now, people who 
are of low socioeconomics rely on calorie-dense and nutrient-
not food because that is what some of our food policies have 
led to in this country. You can walk down any aisle in a 
grocery store and kind of see that in action.
    And so I think it is really important that we do look at 
this document that lays out several programs, not just the ones 
that are already in existence that you mentioned, but others 
that could support communities to find solutions that fit the 
needs of that particular community. As a former classroom 
teacher, I used to see--I saw the meals that were provided in 
schools. I saw what my children brought to school to eat. Now I 
noticed that several of those children have developed diabetes 
and that is something that is going to cost and is costing the 
American public a tremendous amount of money, so we need to 
make sure that we are doing what we can and put----
    The USDA says that for every two programs that they fund 
through the Community Food Project Grants, there are eight 
others that go unfunded and they have done tremendous work, the 
10 years that this grant has been made available. We are asking 
that that be increased so that we can have more communities 
show us what they can do to--because Community Food Project 
grants meet the needs of low-income people while at the same 
time benefiting our farmers. And in this day and age, that is a 
big job, to address those two needs simultaneously.
    But thank you for your comments.
    Senator Casey. Thank you very much. Sorry for the overtime.
    Chairman Harkin. It is very good. I just say to my friend 
from Pennsylvania and to you, Ms. Jackson, our nation for that 
we ought to take pride in having established a Food Stamp 
Program that allows people of low income to get adequate food. 
The other problem is that the highest incidence of diabetes and 
obesity and bad health is among low-income people. This is not 
surprising since the cheapest and most filling, not to mention 
convenient foods are high in fats and carbohydrates. One of the 
reasons they don't buy fruits and vegetables is because those 
are the most expensive things in the store. And, if you are 
shopping at you local Bodega, fresh fruits and vegetables may 
not even be available.
    Now, I hope to work with the Senator from Pennsylvania and 
the Senator from Michigan on the farm bill to maybe put some 
incentives in there, so that when you use your EBT card, if you 
buy fruits and vegetables, you get a bonus in your Food Stamp 
allowance. For example, if you bought something for a dollar, 
it would only cost you maybe 50 cents or something like that to 
encourage people to purchase and consume more fresh fruits and 
vegetables.
    The other thing is to allow users of the EBT card, Food 
Stamp cards, the EBT card, to use those at farmers' markets. We 
tested that out last year by providing farmers' markets with 
these wireless point of service devices that enabled EBT card 
use even where theere was not electricity or a pemanent farm 
stand in place. The next project is information out through our 
Community Action Agencies, churches, different places like that 
so that people who use the EBT cards know that they can take 
them to the farmers' market. In the places that we experimented 
with these devices and publicity, the result was--I don't know 
if it was overwhelming, but very positive. The Food Stamp 
recipients would go to local farmers' markets and start picking 
up fresh eggs and fresh meats and fresh fruits and vegetables 
and things like that.
    Ms. Jackson. And I think your proposal to have that bonus 
be particularly helpful, because studies show that most 
people's Food Stamp dollars don't last them long enough, you 
know, don't take them through the month adequately. At the same 
time, when we work for farmers, we want farmers to get as much 
of the food dollar as possible, so we are paying the high cost 
of cheap food, so we want our farmers to get as much money for 
their food as possible. So you are kind of playing both ends 
against each other.
    Chairman Harkin. Right.
    Ms. Jackson. And so I think it does need something extra 
added to the EBT situation so that they have more money to 
spend at the farmers' markets.
    Chairman Harkin. Thank you very much. This has been a very 
informative panel. We thank you very much for your wonderful 
testimony and especially the written testimony you have, which 
gives us a lot of things to go on.
    But this will be, I can tell you right now, this will be a 
very significant part of this farm bill. I think we all agree 
on that. We are going to focus more on specialty crops. As you 
point out, 30 percent of our farm income, cash, goes to 
specialty crops, and yet it has not been made much of a part of 
the farm bill in the past and we are going to do more, I hope, 
in this regard in this bill. Of course, I know the Senator from 
Michigan is one of the leaders in this, she and Senator Craig, 
and I also know the Senator from Pennsylvania, also. So we have 
got good people here working on this. So I thank you very much.
    Now, we will call up our second panel, and he has been most 
patient being here all this time and I appreciate Senator Craig 
for being here before the next panel. I would call up the next 
panel. That would be Mr. Phil Korson of the Cherry Marketing 
Institute; Ms. Maureen Marshall of the United Fresh Produce 
Association; Mr. A.G. Kawamura, Secretary of Agriculture--well, 
hello again. I haven't seen you for some time. That is good--
from California; Mr. John Rice, former Chairman of the U.S. 
Apple Association; and Mr. Bill Brim, Georgia Fruit and 
Vegetable Growers Association.
    Before we open this panel, I would yield to my good friend, 
the Senator from Idaho, Senator Craig.

     STATEMENT OF SENATOR CRAIG, A U.S. SENATOR FROM IDAHO

    Senator Craig. Mr. Chairman, thank you very much for the 
courtesy you have extended to allow me to stay behind the dais 
this morning. I used to serve on this committee and I, in 
listening to the last panel, realize how much I miss it, having 
farmed and ranched what I say the better and productive side of 
my life. To even have a discussion on pollenization was a 
fascination because I used to recertify alfalfa seeds and 
pollinators were critical. I spent a good deal of time in the 
Central Valley of California now working with agricultural 
people, primarily on water issues and immigration and labor 
issues, so it has always been a fascination and an involvement 
of mine.
    Now I am here working with Senator Stabenow on what I think 
is a very important issue, and when I look at the makeup of the 
panel that you have allowed me to lead this morning, it falls 
so directly into what you have already said you would put as a 
high priority this year in the writing of a new farm bill, and 
we believe it is and must be a priority, I think most do not 
realize, Mr. Chairman, the significance of specialty crops and 
their value in the U.S. economy and in the health of U.S. 
citizens. You heard a little bit of that this morning.
    According to the U.S. Department of Agriculture--these 
figures have been talked about some, but fruits and vegetables 
alone add $29.9 billion to the U.S. economy, and that is in 
2002. That doesn't include nursery crops and a variety of other 
ornamental plant crops and specialty crops of that type that 
are rapidly becoming a part of the U.S. agricultural and 
marketing scene. In my State of Idaho, that side of it is 
growing significantly. The specialty crop industry accounts for 
$53 billion in cash receipts for U.S. producers, and that is 
close to 54 percent of total cash receipts for all crops in 
American agriculture today. So it is extremely significant.
    I grew up in a State of specialty crops, so when I think of 
it, yes, we are large grain producers in the North, and yes, we 
produce sugar beets, and yes, of course, potatoes. But when I 
look at cherries and table grapes and wine grapes, of course, 
and apples and onions and carrots and a variety of the seed 
crops that we produce in my State because of the uniqueness of 
the climate, dry falls, controlled moisture because of 
irrigation and all that, we really--it has been a very 
significant role for our agriculture to play.
    Just a few years ago, Mr. Chairman, I was able to get the 
wine industry of Idaho just a small grant to do a little 
focused research, to do a little advertising, and it has 
significantly helped them in a way that I think, when I focus 
on that and when I am working with the Senator from Michigan, 
we clearly understand the importance of it.
    Maintaining a viable and sustainable specialty crop 
industry also, as I said, benefits the American citizen. We 
heard about obesity earlier and the tragedy of that, especially 
on our young people today. I used to sit in this room chairing 
the Aging Committee and I talked about these longevity charts 
and what it is doing to us in domestic policy, if you will. 
What do we do when the average age gets to be 90, when we have 
five million septuagenarians. I am now being told that if we 
are not careful, those demographic charts are going to adjust, 
not upward but downward in the next generation, and that would 
be the greatest tragedy played upon the American scene that we 
have ever seen. With the kind of investment that we make in 
science and health today, to fail in those areas would just be 
a tragedy.
    S. 1160 that we have introduced, the Specialty Crop 
Competition Act of 2007, we would hope that in the drafting of 
the farm bill, you and the committee would take a special look 
at this because we have spent a good deal of time working with 
the industry itself, crafting it in a unique way, in a 
bipartisan way that we think fits. I talked with the Secretary 
of Agriculture the other day. They have looked at our proposal 
and are very enthusiastic about it in a general sense. I can't 
say it was an endorsement, but he recognizes, as we all do, the 
value of specialty crops in this area.
    Mr. Chairman, this bill does not provide direct subsidy to 
producers like other programs do. It is a different approach 
because specialty crops are different in that respect. It is a 
bill that I think is a step forward to highlight the 
significance of this industry in a way that brings benefit not 
only to the industry and the strengthening of it, but also the 
diversity that the food supply provides to a healthy consumer, 
and that, of course, is predominately the American consumer.
    Thank you very much for allowing me to slip in and say 
hello to the committee again and to support my colleague, 
Senator Stabenow, in this effort and the specialty crop 
industry per se.
    Now, I should stay for the third panel because it is dairy, 
but I won't. That is one of the uniqueness of my State. We are 
one of the fastest-growing dairy States in the nation, as you 
know, and I think we are up in the top four or five now and 
still growing and it plays a significant role in the overall 
economy of our State and the region. But that, I will not do. 
You have been generous and kind with your time. I will monitor 
and my staff will work very closely with yours and the other 
Senators as you craft a new farm bill for our country. Thank 
you.
    Chairman Harkin. Well, Senator Craig, thank you very much 
for a very perceptive statement. You sure you don't want to 
come back on the committee? We could use you for this farm 
bill.
    Senator Craig. I have been trying to get back, but they 
won't let me for some reason.
    Chairman Harkin. I know.
    [Laughter.]
    Chairman Harkin. Well, I can assure you, I am aware and my 
staff is aware of the bill that you and Senator Stabenow have. 
As I said, we look forward to working with you. You know how 
this place operates. Obviously, we would like to have the 
benefit of your insight and your knowledge as we move ahead on 
this bill on specialty crops and what we do to really get not 
only more produced, but get more consumers eating them, too.
    Senator Craig. Well, Mr. Chairman, the thing that concerns 
me, and I have watched it closely over the years, there are a 
variety of input problems that are changing the scene of 
American agriculture. Senator Chambliss and I have worked very 
closely on the issue of labor and a necessary and important 
labor pool. But I think if we are not careful, we are literally 
going to see the divesting of the U.S. agriculture portfolio in 
a way that, in the long term, damages this country.
    I have large producers not only in my State, but in the 
Central Valley of California, I have had producers tell me, 
Larry, if we can't do it here, we will simply go elsewhere. And 
that isn't a threat, that is a reality of all of the input 
costs. It is a reality of certain things. It is a reality of 
labor, a combination of things that we clearly have to be 
sensitized to.
    And a farm bill can set trends, can set policy, can do a 
variety of things that I think lend to the stability of 
American agriculture. So the task ahead of you is critically 
important. Thank you.
    Chairman Harkin. Thank you, Senator Craig.
    Again to this panel, I want to make clear, your statements 
will be made a part of the record in their entirety. We will 
just go down, from Mr. Korson on down, and to introduce Mr. 
Korson, I will yield to the Senator from Michigan, Senator 
Stabenow.
    Senator Stabenow. Thank you. Before Senator Craig leaves, 
Mr. Chairman, I just want to thank Senator Craig. It is a great 
pleasure to work with him on this issue. He has, I think, 
spelled out very well what the goals are and I would agree, we 
have a very broad coalition of people, I think from all over 
the country. I appreciate your leadership.
    Thank you, Mr. Chairman. I know you and Senator Chambliss 
also care very deeply, both from the standpoint of our growers 
as well as the nutrition programs and what we can do to achieve 
multiple goals. I would just in introducing my good friend, 
Phil Korson, just have to put a plug in that, in total, about 
50 percent of the cash receipts in the country, if you count 
everything beyond fruits and vegetables, nuts and horticulture, 
floriculture, all of it together, about 50 percent is specialty 
crops and it is the equivalent to our five program crops 
together.
    I have program crops in Michigan, as well. We want to see 
them do well. But when we look at 93 percent of the direct farm 
bill cash subsidies going to five program crops, we are not 
asking for 93 percent. We are not even asking for 1 percent of 
the cash subsidies. But as our panelists will say today, there 
are important things that we need to do to be supporting this 
critical industry and its variety.
    One of the key people in Michigan, Senator, Phil Korson has 
been a key person in Michigan and nationally on all of these 
issues. He is President and Managing Director of the Cherry 
Marketing Institute, which is a national research and promotion 
organization for tart cherries, which we are proud to lead the 
Nation in. He has also played a key role in planning strategic 
directions through the Tart Cherry Industry Council and he is a 
member of the Promotion Committee for the National Cherry 
Growers and Industries Foundation. He has numerous awards, is 
involved, I think, in every aspect not only of cherries, but 
apples, asparagus, all of our specialty crops in Michigan.
    I am just so pleased that you could be here to share your 
time and expertise with us today. Welcome.

STATEMENT OF PHIL KORSON, CHERRY MARKETING INSTITUTE, LANSING, 
                            MICHIGAN

    Mr. Korson. Good morning, Chairman Harkin and Ranking 
Member Chambliss and other members of the Senate Agriculture 
Committee. Thank you for the opportunity to be here and present 
testimony on behalf of tart cherry growers in Michigan and 
across the country and provide input into the next farm bill.
    I would like to extend a special thanks to our Senator 
Debbie Stabenow for her important role that she has played on 
this committee and who has worked very hard on our State's 
specialty crops and the issues that we face for many, many 
years. Senator Stabenow, we appreciate all that you have done 
for us. I commend you and Senator Craig on the introduction of 
the new specialty crop bill. You have set a high standard for a 
lot of us in the specialty crop area and the provisions that 
potentially could be in the next farm bill.
    Members of the committee, the Cherry Marketing Institute is 
a national organization that was created in 1988 to help 
promote tart cherries and fund research. Our members who 
provide funding include primarily growers from across the 
country. We offer to the public, food manufacturers, and 
government expertise on cherries and their application as we 
think about nutritional uses on basically all fronts and at the 
same time fund health benefits research on our product.
    Our efforts to promote our crop were recently featured in 
the Wall Street Journal when we announced bringing on board 
Jeff Manning as the Chief Marketing Officer. Mr. Manning is 
best known for the development of the ``Got Milk?'' campaign 
and worked for the California Milk Processing Board for a 
number of years. His instrumental role in developing our new 
``Not just another berry'' campaign will help increase 
awareness about the incredible health benefits of tart cherries 
and build new demand as we look to the future.
    The industry I represent in Michigan and across the country 
is an excellent example of the unique needs of not just 
cherries, but many other specialty crops. My testimony today 
will outline specific concerns as it relates to cherries, but 
they could be applied to many other things.
    First and foremost, the specialty crop community is excited 
about the opportunity to include for the first time ever a 
specialty crop title in this farm bill. We have come a long 
ways in the last decade to make our concerns known to Congress 
and we appreciate the opportunity to address longstanding 
issues unique to our crops in this farm bill. While there are 
many causes we all share today, I will focus on the importance 
of nutrition, research, and disaster programs.
    Cherries are an important specialty crop in Michigan's 
agricultural economy and the nation. In fact, Michigan's tart 
cherry growers produce 75 percent of the U.S. supply on an 
annual basis. Michigan is also a unique State in that many 
other fruits and vegetables are not grown for fresh 
consumption. Rather, they are processed in a multitude of 
value-added products, like dried cherries, cherry juice, flash 
frozen, et cetera, et cetera.
    It is important to note that while the demand for our 
product has been strong, effects on our processing economy in 
the State and the direct impacts on the thousands of fruit and 
vegetable growers processing and handling jobs in Michigan and 
across the country. It is critical that when we are developing 
legislative language regarding specialty crop, that we consider 
all forms of fruits and vegetables. Processed fruits and 
vegetables are an important component of a healthy diet and 
come in many forms, including dried, cut, peeled, and flash 
frozen.
    Nutrition--we support all efforts to increase additional 
fruit and vegetable purchases for distribution to all USDA 
Nutrition Programs, including the National School Lunch 
Program. We support the highest level possible of mandatory 
funding for this program. Federal purchases of fruits and 
vegetables in surplus years are critical to maintain fair 
grower prices.
    We have had a good crop in 2006, but we now face an 
incredible surplus that needs an outlet to help maintain grower 
prices as we go into 2007. We are awaiting an announcement from 
USDA for a much-needed purchase of about 26 million pounds of 
tart cherries. The more we can increase the Federal Fruit and 
Vegetable Purchase Programs, the more we can help specialty 
crop growers in those years when they are in their most surplus 
position. These purchases also provide excellent value and a 
very competitive price for the products that might not 
otherwise be used. Again, it is important to reiterate that 
these purchases should not be limited to just fresh fruits and 
vegetables but should be available to all fruits and vegetables 
that are grown and processed in the United States.
    Research is key to the future of our industry. It keeps us 
on the cutting edge and competitive in a world market. We 
support the administration's proposal for $1 billion for a 
specialty crop research initiative and are especially excited 
about all the research provisions included in Senator 
Stabenow's specialty crop bill.
    One important area that we need more help is in finding 
alternatives to pesticides used to combat pests and diseases on 
our crops. Because the incentive to develop new pesticides is 
relatively small compared to the demand for pesticides for 
major crops, we are at an economic disadvantage and many times 
don't have those new alternatives available when we need them. 
Azinphos methyl is one example of those that will be phased out 
in 2012.
    Disaster assistance--as we think about disaster assistance, 
acts of God happen and when they happen, it puts growers in 
very uncomfortable positions. Margins for growers are simply 
too thin for farmers to absorb these costs on their own, and 
their low-interest loans can sometimes be helpful but are often 
difficult to pay back when operations have been hit hard. We 
support efforts to create permanent disaster assistance for all 
specialty crop farmers. The current emergency supplemental 
funding bill contains measures that would help these farmers, 
but their fate rests in the political whims and in the 
controversies of the bill. Our nation needs a permanent system 
in place to help growers who are impacted by these natural 
disasters.
    In conclusion, the specialty crop community and especially 
the United States tart cherry growers that I represent 
appreciate the attention paid to our unique interests in this 
farm bill. On behalf of my growers, I offer my strongest 
endorsement for the specialty crop bill and hope that it 
provides the foundation for the specialty crop title in the 
farm bill.
    Thank you again to Senator Stabenow for your leadership and 
thank you to the committee for the opportunity to present my 
views.
    [The prepared statement of Mr. Korson can be found on page 
165 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Korson.
    Now we will turn to Ms. Maureen Torrey Marshall of the 
United Fresh Produce Association of Elba, New York. Ms. 
Marshall is Vice President of Torrey Farms, Incorporated, of 
Elba, New York. The Torrey family has farmed in upstate New 
York for 11 generations?
    Ms. Marshall. Yes.
    Chairman Harkin. That is very interesting. Ms. Marshall 
oversees marketing and business management for her family's 
10,000-acre farm. That is a pretty good size farm. She also 
works with her husband, Paul Marshall, in managing their 
trucking business. Ms. Marshall has served the produce industry 
at the State and national level for many years and is 
testifying today on behalf of the United Fresh Produce 
Association.
    Welcome and please proceed, Ms. Marshall.

  STATEMENT OF MAUREEN TORREY MARSHALL, UNITED FRESH PRODUCE 
                  ASSOCIATION, ELBA, NEW YORK

    Ms. Marshall. Thank you. Good morning, Mr. Chairman and 
members of the committee. As I have been introduced, my name is 
Maureen Torrey Marshall. My day job is farming with my two 
brothers in Western New York. Torrey Farms is an 11-generation 
family farm operation that has been able to grow. We specialize 
in fresh-to-market vegetables. We also grow processing 
vegetables and grain crops for rotation, and in 1996 we entered 
the dairy business and we run two dairy farms now. I am also a 
soccer mom and I also assist my husband in his transportation 
company. My night job and my passion, I serve as Co-Chairman of 
the United Fresh Produce Association Board of Directors and 
appreciate the opportunity to testify before the committee 
regarding the 2007 farm bill and the role Congress will play in 
shaping policy for specialty crop producers and my next 
generation across the United States.
    I am also presenting testimony today along with my 
colleagues on this panel as members of the Specialty Crop Farm 
Bill Alliance. More than 100 organizations representing growers 
of specialty crops, including United Fresh, have indicated 
their support for the policy priorities developed by the 
Specialty Crop Farm Bill Alliance that will be discussed today.
    Domestic policy issues facing the produce industry: As part 
of the broad specialty crop industry, we believe government 
policy should provide incentives for private investment, tools 
to increase profitability, and help to those producers who are 
committed to constant improvement to better serve the consumer 
needs.
    Five years ago, during testimony before the House 
Agriculture Committee regarding the reauthorization of the 2002 
farm bill, the produce industry presented broad-based 
recommendations for the farm bill and we believe that the 2002 
farm bill took a step in the right direction for the produce 
industry. However, as part of a broader specialty crop 
coalition, we believe that there are additional areas where the 
Federal Government can assist in maintaining the 
competitiveness of this important segment of U.S. agriculture.
    As the policy discussion for the 2007 farm bill takes 
shape, we look forward to working with you to develop new 
programs and enhance existing programs that will improve the 
competitiveness of the specialty crop industry. Most would 
recognize that as the specialty crop production across the 
country varies in different States and regions, so do the 
individual elements that impact production, from weather to 
land values, local regulation, local pest and disease 
pressures.
    Over the past 2 years, the coalition has been working with 
Members of Congress to develop specific legislative language 
consistent with our priorities and help address the unique 
diversity of the U.S. specialty crop industry. The cumulation 
of that work came last week when Senators Debbie Stabenow and 
Senator Larry Craig, along with 17 cosponsors, introduced the 
Specialty Crops Competition Act of 2007, S. 1160. We believe 
this legislation is a comprehensive farm bill package providing 
the necessary farm work to enhance the competitiveness of the 
specialty crop industry. We expect this legislation to begin a 
constructive discussion of specific crop farm policy and allow 
our industry to play a significant role in the farm bill 
debate. We congratulate and thank you two Senators, along with 
your colleagues who cosponsored this bill, on supporting the 
efforts of the specialty crop industries across the country.
    I would now like to take a few minutes to highlight some of 
the policy areas that we believe Congress should incorporate 
into the 2007 farm bill and are at the focus of the coalition's 
farm bill recommendations.
    Prohibition of planting fruits and vegetables--the 
Specialty Crop Farm Bill Alliance strongly supports maintaining 
or strengthening current U.S. planning policy, which restricts 
producers from growing fruits and vegetables on acres receiving 
program payments. Fruit and vegetable producers are concerned 
that any alterations in this provision would allow commodity 
producers to migrate any startup costs or migrate risks 
inherent to fruit and vegetable production, resulting in unfair 
competition.
    Nutrition policy--the fruit and vegetable industry has the 
good fortune to offer consumers a healthy and nutritious 
product that is recognized as critical to preventing cancer and 
other chronic diseases, reducing obesity, diabetes, and 
maintaining overall good health. The dietary guidelines for 
Americans call for the consumption of five to 13 servings a day 
of fruits and vegetables, but on any given day, 45 percent of 
children eat no fruit at all and 20 percent eat less than one 
serving of vegetables. The School Fruit and Vegetable Snack 
Program is an effective and popular nutrition program proven to 
increase fresh fruit and vegetable consumption. It should be 
significantly expanded in the 2007 farm bill.
    State block grants--the industry also supports continued 
expansion of the State Block Grant Program for specialty crops 
and allow States to invest in programs and projects that 
support production-related research, commodity promotion, food 
safety, and other programs that enhance the competitiveness of 
specialty crop producers. Because different States have 
different conditions, it is important that we have these 
different block grants that can meet the needs of a particular 
State.
    Research policy--we need to continue investments in 
research and development for specialty crop production. We also 
need a good conservation policy. As environmental regulations 
continue to put pressure on specialty crops industry's ability 
to be competitive in the world economy, we need to keep pushing 
our conservation policy.
    Our international trade policy--we should address attention 
to our current trade policies which help expand market access. 
We face obstacles in the development export markets for our 
commodities and the unique challenges due to the perishable 
nature of our products. Farm bill programs that have worked 
well, increasing access to foreign markets for domestically 
produced specialty crops are the Technical Assistance for 
Specialty Crops and the Market Access Program, should be 
expanded in the next farm bill.
    In concluding, many of the pressures that specialty crop 
producers face are similar to those of producers of other 
commodities, but the perishable nature of our crops result in 
different marketing strategies, market requirements, and the 
need to move our product to market quickly. We hope these 
unique characteristics can be addressed through agricultural 
policies that drive domestic consumption and expand foreign 
market access while investing in research, food safety, 
conservation, and pest exclusion policies that benefit the U.S. 
specialty crop industry.
    Like producers of program crops, specialty crop growers 
face significant challenges in the production and marketing of 
their commodities that must be addressed if we are going to 
remain competitive in an increasingly global marketplace. We 
ask that the committee continue to work with the produce 
industry to ensure that specialty crops are appropriately 
addressed as we move forward.
    Chairman Harkin. Could you sum up, please?
    Ms. Marshall. That concludes it. Thank you very much.
    [The prepared statement of Ms. Marshall can be found on 
page 197 in the appendix.]
    Chairman Harkin. Okay. Thank you very much.
    Next we turn to Secretary A.G. Kawamura, who is the 
Secretary of Agriculture for the State of California. I was 
privileged to be on your farm once a few years ago.
    Mr. Kawamura. Yes, you were.
    Chairman Harkin. Congratulations on your position as 
Secretary of Agriculture.
    Mr. Kawamura. Thank you very much.
    Chairman Harkin. Welcome to the committee.

STATEMENT OF A.G. KAWAMURA, SECRETARY OF AGRICULTURE, STATE OF 
               CALIFORNIA, SACRAMENTO, CALIFORNIA

    Mr. Kawamura. That field, many of us--in fact, many of the 
farmers around the country, of course, rent properties to grow 
their crops. Unfortunately, that field that you were in is now 
a housing development, for the record.
    Thank you, Chairman Harkin, members of the committee, for 
calling this hearing to discuss challenges and opportunities 
facing American growers and ranchers. I am here representing 
Governor Schwarzenegger, who has been a champion and a very big 
supporter of agriculture, not just in California, but across 
the country.
    In California, we are working hard to share our 
understanding that access to nutritious California-grown foods 
and foods from other States is an essential component of a 
healthy lifestyle and is key to maintaining the economic 
prosperity of the State and nation. The health of this nation 
relies upon the investment we make in our agricultural economy.
    As we move toward reauthorizing a 21st century farm bill, 
we must understand the key challenges and opportunities facing 
agriculture. It was not long ago that this nation's specialty 
crop industry--fruits, vegetables, and nuts, the other 
products--were referred to as minor crops. In fact, the U.S. 
specialty crops industry now accounts for, as was mentioned 
several times, over 50 percent of the U.S. farmgate value. It 
is not wrong to say that U.S. agriculture has been defined in 
the past by the great successes of corn, dairy, wheat, rice, 
and cotton, but it is wrong to omit specialty crops from the 
list of high achievements and high successes.
    Every nation in the world seeks a healthy, thriving 
population. We as the United States, the producer of the safest 
and highest-quality agricultural products, are facing a crisis 
in nutrition. The tragedy of adult onset diabetes in children 
and other health implications from malnutrition are the 
evidence of this epidemic. According to health professionals, 
we as a nation spend 95 percent of our health care costs after 
we are already sick and less than 5 percent on prevention and 
wellness. No farmer in this nation would want that ratio. We 
spend 90-something percent of our dollars making sure our crops 
or our flocks are thriving and we hope we don't have 5 percent 
that are chronically sick.
    U.S. agriculture provides a healthy building block for a 
diet of dairy, whole grains, meats, and specialty crops. We 
provide guidelines that can improve the individual diet, 
increase the health of the nation, and reduce the cost and 
burden of health care. Yet when we speak of a farm bill, 
consumers and the media see entitlements. Instead, we should 
speak of a public health bill that places agriculture on the 
forefront of preventative care, providing healthy and 
nutritious products to a thriving population.
    The key elements of this public health bill should focus on 
the overall health of our nation. The areas of nutrition, rural 
communities, working landscapes as part of the environment, 
specialty crops, and renewable energy must be priorities. The 
specialty crop industry, nearly 50 percent of U.S. farmgate 
value, is the key to improving the health of this nation. 
Within a farm bill context, we should see not that specialty 
crops are there by themselves as an individual title, but 
rather encompassed within all title areas of the farm bill.
    The Specialty Crop Competitiveness Act of 2001 was unable 
to fulfill the demand that was placed upon it. The Act did, 
however, provide multiple successes in the areas of research, 
nutrition, disease prevention, marketing, and trade, hitting 
the targeted areas of a healthy nation. The most innovative 
concepts in this Act provided funding directly to States to 
address local challenges and opportunities that cannot be 
effectively addressed by the national government. Every State's 
specialty crops' needs are different and States are in the best 
positions to assist local growers with the specific investments 
they need to increase competitiveness.
    The Specialty Crops Competitiveness Act is an investment in 
the health of the Nation and must be integrated within our 
public health bill. We can all agree that investment in 
agriculture is necessary. Providing the funding for that 
investment is difficult. We should not be restricted to a 
shrinking pie scenario when we are making an investment in our 
critical resource base for the next 5 years. In respect to 
funding for the farm bill, Congress should look for innovative 
areas in government funding that can increase the preventive 
role of agriculture in our nation's health by reprioritizing 
our investment strategy.
    In the end, we as stewards of our nation's agricultural 
infrastructure must take a targeted investment approach that 
enhances the health of our population and environment and 
continues to provide a dependable, safe, and affordable supply 
of food, fiber, and fuel. If we fail to make that investment, 
we will be held accountable for turning over the security and 
safety of our food supply to foreign agricultural suppliers. We 
do not want to become replaceable suppliers of those products. 
A secure domestic food, fuel, and fiber supply is a national 
security imperative for the United States.
    In closing, we have seen the success of the Specialty Crop 
Competitiveness Act of 2001, the concurrent success of the 2004 
Specialty Crop Act. We see some very good efforts from 
Congress, from the Senate, from the House in terms of specialty 
crop bills that are out there, whether it is S. 1160 or 1600, 
and we look for more collaboration in those bills and more 
attention to those kinds of priorities.
    I cannot stress enough that this is not the time in our 
nation's history to allow a shrinking pie mentality for the 
investment we need to make in the strategic resource of 
agriculture. Our commitment to agriculture and our commitment 
to a healthy nation and population deserves this investment.
    Chairman Harkin, members of the committee, thank you again 
for this opportunity to provide remarks.
    [The prepared statement of Mr. Kawamura can be found on 
page 161 in the appendix.]
    Chairman Harkin. Mr. Secretary, thank you very much, and 
again, I thank you for your many years of public service and 
your devotion to agriculture and to public health and to 
preventative health, and maybe I will get into a little bit 
more of that in the question period.
    Now we turn to Mr. John Rice. Mr. Rice is a seventh 
generation fruit grower in Adams County, Pennsylvania. Together 
with three of his brothers, he owns and operates R&L Orchards, 
which has about 1,000 acres of orchards, including 800 acres of 
apples, 160 acres of peaches and nectarines, and 40 acres of 
pears. He is the former Chairman of the U.S. Apple Association 
and is testifying here today on his own behalf.
    Mr. Rice, welcome to the committee.

      STATEMENT OF JOHN RICE, FORMER CHAIRMAN, U.S. APPLE 
     ASSOCIATION, GARDNERS, PENNSYLVANIA, ON HIS OWN BEHALF

    Mr. Rice. Thank you, Chairman Harkin, Ranking Member 
Chambliss. Thank you for the kind remarks from my own Senator 
Casey, and thank you, distinguished members of the committee 
and good friends of the U.S. apple industry. As I have been 
introduced my name is John Rice. I am a seventh generation 
fruit grower from Pennsylvania. Together with my three 
brothers, we own and operate R&L Orchard Company and Rice Fruit 
Company, which stores, packs, and markets fresh fruit produced 
by R&L Orchards and about 50 other family farms in 
Pennsylvania, as well as Maryland and New York. Today, Rice 
Fruit Company is the largest fresh apple packing facility in 
the East. We have 115 full-time employees and employ as many as 
150 seasonal employees.
    In many ways, it is an exciting time to be in the apple 
business. A number of exciting new health research studies have 
found possible links between the consumption of apples and 
apple products with a lower risk of breast cancer, heart 
disease, asthma, Alzheimer's disease, and other serious health 
issues. New, great-tasting varieties and new products, like 
bagged fresh-sliced apples, may lead to expanding consumer 
demand and apple consumption. But at the same time, a very 
tenuous labor supply, high energy costs, world competition, and 
increasing regulations present unprecedented challenges for our 
industry.
    The produce industry historically has never relied upon 
direct payment programs to support grower income or market 
prices. Like the majority of fruit and vegetable growers today, 
I do not believe that this would be in the long-term interest 
of my industry. But our industry is strongly advocating for 
programs that will grow demand and grow consumption of our 
products. The Specialty Crops Competition Act introduced last 
week by Senators Stabenow, Craig, Casey, and others, goes a 
long way toward achieving those goals.
    Programs such as the Specialty Crop Block Grant Program are 
also critical to our industry's survival, but the current 
program is seriously underfunded. Pennsylvania received just 
over $100,000 this past year, and that makes it nearly 
impossible to fund the types of projects that we were able to 
realize through the 2001 program.
    The export market is also critical to the health of the 
apple industry in Pennsylvania and nationally. Approximately 25 
percent of the entire U.S. fresh apple crop is sold into 
foreign markets. The Market Access Program has been very 
beneficial to the apple industry, helping to level the playing 
field as we compete with countries such as China and Chile. It 
operates with matching funds provided by American growers, and 
these American producers help to direct and manage the ways the 
funds are spent. MAP is a great example of a successful 
partnership between government and private business. It 
deserves your continued support and increased funding.
    Apple producers and the entire specialty crop industry face 
mounting pressures from the decrease in the availability of 
important crop protection tools. We know that our customers and 
consumers are placing an increased value on sustainability and 
conservation. Unfortunately, conservation practices can be very 
costly and these costs are difficult to recoup in the 
marketplace. Therefore, the next farm bill should include 
expansion of conservation programs, such as EQIP and the 
Conservation Security Program. Both programs encourage good 
stewardship of the environment, but these programs need to be 
expanded with effective outreach to industries such as ours, 
since few of our growers presently know how to access and 
successfully apply for these programs.
    Federal farm policy today must emphasize the need for 
significant investment in specialty crop research. Of 
particular interest to us as apple growers are research 
programs that improve labor productivity, root stocks and 
varietal selection, production efficiency, and fruit quality.
    In conclusion, the American apple industry hopes and 
expects to remain an important part of the American 
agricultural economy and the American way of life. We are, 
after all, as American as apple pie. But to survive, we need 
the support of an agricultural policy that will promote our 
products and help our farmers and not just weigh them down with 
regulations. The 2007 farm bill could help us open the door to 
a healthier produce industry and a healthier America.
    Thank you, Mr. Chairman, for allowing us to testify.
    [The prepared statement of Mr. Rice can be found on page 
208 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Rice. I am going 
to be asking about Elmwood School in my round of questioning.
    To introduce our last witness, I will turn to our Ranking 
Member, Senator Chambliss.
    Senator Chambliss. Thank you, Mr. Chairman. I am very 
pleased to have today as the final member of this panel Mr. 
Bill Brim. Bill is a longtime dear friend of mine whose farming 
operation is located in Tift County, Georgia, which is adjacent 
to my home county and right in the heart of agriculture county 
in Southwest Georgia. Bill operates a greenhouse operation for 
transplant both vegetables and pine trees and he also has about 
4,000 acres that he operates from a produce production 
standpoint.
    Bill is not only one of the best farmers in America, but 
Bill is one of the true leaders in the agriculture community in 
this country. He visits us quite often here in Washington and 
has testified before this committee a number of times. Bill has 
truly been a leader in so many different areas, but most 
recently in the area of the Migrant Worker Program, H2(a) 
program, and seeking to help us reform it in the right way. 
Bill is a great resource for me, in addition to being a dear 
friend.
    So, Bill, welcome to the committee. We look forward to your 
testimony.

  STATEMENT OF BILL BRIM, GEORGIA FRUIT AND VEGETABLE GROWERS 
                  ASSOCIATION, TIFTON, GEORGIA

    Mr. Brim. Thank you so much. I appreciate the opportunity 
to be here today. Good morning, Chairman Harkin and Senator 
Chambliss. I just want to take a moment just to thank Senator 
Chambliss for really knowing what agriculture is all about in 
our State and how much we appreciate him down in South Georgia 
and the knowledge that he has and presents to us and gives us 
an opportunity to voice our opinions back to him so he really 
knows what is where about what is going on in our area.
    Over the past 2 years, the Georgia Fruit and Vegetable 
Growers Association had about 80 different specialty crop 
organizations to help develop our industry's 2007 farm bill 
policy recommendations. As noted in my written testimony, we 
support the Specialty Crop Coalition recommendations to this 
committee.
    Mr. Chairman, in your invitation, you stated that the 
hearing would focus on economic challenges and opportunities 
facing produce producers in today's world. My comments are 
directed at two economic challenges and two economic 
opportunities which we face as Southeast growers.
    Beginning in the 1985 farm bill, program crop producers 
have been restricted from planting fruits and vegetables on 
land for which they received a subsidy payment. While there 
have been some adjustments in the flex agriculture planting 
restrictions, essentially it has remained in place as a 
fairness issue. Removing the planting restrictions on base 
acres will allow program crop producers to continue to receive 
a subsidy even if they are growing fruits and vegetables. This 
will place most fruit and vegetable growers at a competitive 
disadvantage and before the crop is even planted.
    In addition, according to the flex acres economic study 
report by Informer Marketing Research, removing the planting 
restrictions is predicted to remove roughly one million acres 
into production of specialty crops--remove roughly one million 
acres. While this accounts for less than one-half of 1 percent 
of the total program crops, acre-based, it represents more than 
a 10-percent increase in the total specialty crop acreage. The 
study projected if the planting restriction plan was lifted in 
Georgia, we would see more than 26,000 new acres. That would be 
an increase of almost 9 percent in our State's production, 
large enough to significantly impact market supply and demand. 
Nationwide, we expect over-production would translate into a 
revenue loss of over $3.1 billion in fruits and vegetables to 
fruit and vegetable growers. Plain and simple, removing the 
planting restriction flexibility restriction will be a 
significant economic disaster for the fruit and vegetable 
industry.
    Another major challenge for specialty crop producers is the 
$80,000 limit placed on disaster payments. We support 
restructuring the current disaster assistance payment 
regulations to allow specialty crop producers to receive a 
proportionately larger disaster assistance payment due to much 
higher input costs, higher labor costs, potential losses per 
acre experienced by specialty crop producers as a result of a 
disaster. This is significantly greater than that of other 
commodity producers.
    Another area is the block grants can be a tremendous 
economic opportunity for specialty crop producers. For example, 
funds for the 2001 block grants allowed our association to 
establish a Food Safety Network, an educational initiative that 
would train over 300 growers and certify more than 50 farm 
operations. A State block grant is a centerpiece for a fruit 
and vegetable farm bill program. Each of our specialty crops 
and each geographic area have unique challenges and attributes 
which must be addressed individually. It is at this State level 
that growers, shippers, packers, workers, laborers together 
with industry and government have the expertise and can 
identify the programs that we need to enhance our 
competitiveness in the specialty crop industry as a producer.
    The economic opportunities generated from agricultural 
research, except to say research is the foundation for the 
growth of our industry and acts as a catalyst for change. 
Federal investment in agricultural research should be increased 
and allocated to reflect the national importance of fruits and 
vegetables in our American diet, supporting our food safely, 
our health, our American diets, our safe food supply that we 
have in this country.
    Mr. Chairman and Senator Chambliss, thank you for the 
opportunity to present our thoughts and views today as we look 
forward to working together to craft a farm bill that would 
address the economic opportunities and challenges we are facing 
in the fruit and vegetable industry. Thank you.
    [The prepared statement of Mr. Brim can be found on page 
101 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Brim, and I thank 
all the panel for excellent testimonies.
    I guess for all of you, I just want to say that we have to 
increase consumption of fresh fruits and vegetables, and Mr. 
Kawamura, I think, really put his finger on it, talking about 
preventative health and getting people to eat better. We know 
what is happening to kids with diabetes and obesity, the new 
dietary guidelines. We have to get these kids eating better for 
our next generation.
    To that extent, the last farm bill started a pilot program, 
and some of you mentioned it in your testimony, the Fresh Fruit 
and Vegetable Program, a Snack Program in schools. We started 
in four States, Michigan being one of them, and I think we are 
up to 14 States now. We started with four States and 100 
schools. We are up to about 14 States and 400 or 500 schools, 
something like that, now. Every school that has ever 
participated, not one school has asked to drop out of it. And 
now in States like yours, Mr. Rice, where we are now starting, 
schools that don't have it are wondering why they can't get it.
    You had a story about Elmwood School and the kids there 
getting the snacks and they are now involving nutrition 
education along with it. I have been to several schools in 
different places that have this program and many of them have 
incorporated nutrition education into their curriculum. In 
other words, they are not only giving the fresh fruit to the 
kids, but then, they also address where where does the fruit 
come from or where do the vegetables come from, how they are 
grown, that type of thing.
    More and more, we are seeing these kids that really kids 
get hungry in school in the morning, and when they get those 
growlies, as the teacher says, now they are able to get fresh 
fruit or a vegetable or carrot sticks or broccoli--I have seen 
with my own eyes, and I think you are probably going to think I 
am probably going too far in this, but I have seen with my own 
eyes elementary school kids eating fresh spinach.
    [Laughter.]
    Chairman Harkin. People think I must be exaggerating, but 
it's true. They get these little bags. Now, some of the 
marketing, I think Dole and Sunkist and others are now packing 
for this program and they put these little baby spinach leaves 
in a little bag and they give a little can of that ranch dip 
and those kids eat that fresh spinach or fresh broccoli. They 
dip it in and eat it and the kids love it.
    Now, why do I belabor that point? My goal, personal or as 
Chairman of this committee, is to expand that program. My goal 
is that within 10 years, that every elementary school kid in 
America gets free--free--fresh fruits and vegetables as snacks, 
morning, afternoon, not just in the lunchroom, but in the 
morning and in the afternoon, any time of the day, any time 
they get hungry.
    That is about, I think right around about $2 billion a 
year. So we can't do it right now, but we have got to keep 
moving it up, $2 billion a year. That would be quite a market 
for fresh fruits and vegetables, plus it does, for Mr. 
Kawamura, it provides for preventative health care and gets 
kids started early understanding about fresh fruits and 
vegetables so that as they grow older, they will continue to 
eat these fresh fruits and vegetables.
    Almost all of you talked about that. I know you are all 
familiar with it. It has had kind of a slow start, but it is 
moving and we know that it is well liked.
    I say to my friend, Secretary Kawamura, I hope that you 
will go back and talk to Governor Schwarzenegger about this. I 
have talked to him about it personally and we would love to get 
California involved in this program.
    Mr. Kawamura. Yes. Actually, following your great 
leadership, Chairman Harkin, this last year, we had an $18 
million bill for a School Snack Program for fruits and 
vegetables in the school cafeterias as well as a $15 million 
School Garden Program that helps bring a garden back to every 
school where the kids can learn these garden-based lessons. So 
we are trying to get there just like everybody else.
    Chairman Harkin. Has that gotten through the legislature?
    Mr. Kawamura. It did get through the legislature last year 
and we hope to do that again this year.
    Chairman Harkin. That is great. Good for you.
    Mr. Kawamura. It is a crisis.
    Chairman Harkin. How much is it?
    Mr. Kawamura. It is an $18 million School Snack Program for 
the fruit and vegetable side of it and a $15 million----
    Chairman Harkin. So it tracks exactly what these other 
States are doing, right?
    Mr. Kawamura. That is correct, because we are not a part of 
that program yet, but we hope to be on the Federal level.
    Chairman Harkin. Well, this is great news. I did not know 
that, because I had once talked on the phone with Governor 
Schwarzenegger about this, and, of course, he is doing some 
great things in getting junk food out of schools and getting 
healthier food into schools, so please take back my 
appreciation for his leadership in that area.
    Mr. Kawamura. That is exactly right. We all recognize at 
this point we can't say we are ignorant about what the problem 
is, and if we don't act on it soon and quickly, we all move 
into the realm of negligence, I know.
    Chairman Harkin. One other question, just open to the 
panel, is what are the two or three most important things that 
our bill, the farm bill, should do to help encourage Americans 
to eat more fruits and vegetables? Well, the Fruit and 
Vegetable Snack Program, obviously, for the kids in school. 
What else would you advise us to do? Yes, Mr. Korson?
    Mr. Korson. One of the things that I think we rely on and 
one of our program ideas is always to promote our own industry 
and whatever we can do to promote awareness on what these 
things actually do when you consume them. I think fruits and 
vegetables, in particular, are just this fabulous resource, and 
a lot of people just take it for granted. They don't really 
realize it. And so I think we all need additional dollars to do 
what we can to promote our industries not only in the schools, 
but across the country. That is one area.
    Chairman Harkin. Okay.
    Ms. Marshall. I think with the USDA looking at the WIC 
Program and maybe when we had the testimony and the hearings of 
including the $8 voucher, and if that gets approved, that is 
going to help improve the health of women and young children. 
And I think your idea that you presented in the first panel 
about part of the Food Stamp, there would be a credit in buying 
fresh fruits and vegetables.
    And I also think with the School Snack Program, it goes 
farther than just with the young people. These people go home. 
Their parents see what they are eating. They realize that their 
child is not sick as often. They don't have to worry about 
child care while the child is sick and they are starting to see 
results from that. It is also affecting the eating patterns of 
the parents.
    Chairman Harkin. Sure. We have had testimony on that, about 
kids who go home to parents and they are asking their parents 
to buy these things. Mr. Secretary?
    Mr. Kawamura. One of the things that I think the public has 
forgotten is the original Food Stamp Program came in the early 
1940's when recruits applying for the U.S. Services could not 
pass the physical, and so the Food Stamp Program is not an act 
of charity or compassion, although it seems that way. Certainly 
we address the needs of the needy. In this case, it was an 
investment in the health of its first No. 1 resource, which is 
the American public and the ability to defend a nation.
    The current hard work that went into putting together the 
new food pyramid out of the USDA, if we were to just follow 
those guidelines, whether it is whole foods, a good amount of 
both good dairy products, meats, and then, of course, the 
fruits, vegetables, and nuts, the food guide in that pyramid 
would tremendously change the way not only the Nation moves 
forward in its own health, but would also significantly help 
agriculture in many, many areas, if not all.
    Chairman Harkin. Any other responses to that? My question 
was, what should we do in the farm bill? Yes, Mr. Rice?
    Mr. Rice. Certainly from the standpoint of the apple 
industry, we would like to see much more money appropriated in 
the farm bill for specialty crop research. It is something that 
we have been losing over the years and is something that we 
regard as very important.
    There are a list of things in our roadmap that we would 
like to ask for in the way of help from the ARS and the USDA. 
One thing in particular are labor-saving devices, which we 
think may be a long-term solution to the labor shortages that 
we see down the road. And yet I believe that there is 
legislation that limits the USDA's ability to even fund 
research that would do mechanical harvesting and I think that 
that is being addressed. It is something that we believe we are 
on the cusp of having the sensor technology, but we do not have 
it now. It is not the kind of thing that we can do very well 
from within our industry. It is the kind of thing that the 
USDA, ARS is in a very good position to help us with and that 
is what we would like to see.
    Chairman Harkin. Thank you.
    Mr. Brim. Yes. I think being able to support our specialty 
crops by supporting the WIC Program, Food Stamp Program, and 
the programs going to the elementary schools to allow more 
schools, like you said a while ago, Senator, the more we can 
put on line, the more vegetables we are going to be able to 
produce and sell. I think our nutritional value of these 
vegetables will certainly help us down the road as far as being 
able to take care of our nation and then our health.
    Chairman Harkin. Very true. Very true. Thank you all very 
much.
    I will yield to the Senator from Michigan, Senator 
Stabenow, who is a great leader in this whole area.
    Senator Stabenow. Well, thank you, Mr. Chairman, again, for 
holding this hearing because this is very important. I 
appreciate it and I know that your interest and your leadership 
on nutrition dovetails in such an important way with what we 
are talking about today.
    I might just mention again that the Commodity Purchase 
Program, which is so critical not only to support our growers 
and keeping--when there is a surplus in terms of pricing, but 
making those fruits and vegetables available to the programs 
that are so important in our school lunch and breakfast and 
senior nutrition and all those kinds of things. So it is a 
wonderful partnership, and last time in the farm bill, we 
thought we were adding a requirement to purchase $200 million 
more a year in fruits and vegetables and unfortunately the USDA 
interpreted that as $200 million, period, not $200 million 
more. So this is an area that I am hoping we can fix and 
clarify and have folks understand that we want increased 
purchases.
    There are so many different pieces as it relates to 
specialty crops, from research which is critical into pests and 
disease, to market access, to commodity purchase, to support 
EQIP, to conservation programs, tree assistance, I mean, there 
are all kinds of important pieces that come together and I 
appreciate your speaking to many of those. But I wonder if we 
might just take a moment to talk a little bit more about the 
Block Grant Program.
    The USDA has put forward their farm bill, and I appreciate 
they have placed more dollars, substantially more dollars into 
research, other areas, which is very positive. But they did not 
include funding for a Block Grant Program for the States. So I 
am wondering if you would like to speak to that. I know, Phil, 
you spoke about promoting the industry and how each of the 
commodities promotes their industry, but I wonder if you might 
speak to the State Block Grant Program and how that is 
important.
    Mr. Korson. I think, in particular, the State Block Grant 
Program, and that is really, when I was thinking about 
promotion and how do we expand the knowledge and the wealth of 
knowledge, those Block Grant Programs are really critical, 
especially when they come back to the States and directly back 
to commodity groups, because then it becomes a partnership and 
that partnership then allows industries to set priorities on 
how they allocate those resources out.
    In our particular case, we spend a lot of our dollars on 
school lunch promotion activities. When the government buys 
cherries, for example, or dried cherries, for example, we then 
work with school lunch directors to show them how to use those 
products in various ways. We also attend a lot of the shows and 
different events that really try to wholesale change the way 
people think about cherries. And so those block grants play a 
key role in that promotion, market awareness opportunity that 
we would take advantage of as a commodity group. They are 
really important.
    Senator Stabenow. Mr. Chairman, I think it is an important 
point. The State Block Grant Programs give the States and the 
commodity groups the ability to have resources to do the 
promotion that you were talking about earlier and I am hopeful 
we will see that retained.
    Mr. Secretary, in calling on you, I also want to--a good 
friend of mine, Alice Waters, has done amazing work on the 
schoolyard gardens and so on. I am assuming she is working with 
you.
    Mr. Kawamura. Yes, she is.
    Senator Stabenow. Yes.
    Mr. Kawamura. We have had a great working relationship on 
talking about ``slow food'' as a part of this nation. We have a 
very fast society and slow food is one of those very exciting 
areas that is building throughout the country.
    Senator Stabenow. Right. But on block grants?
    Mr. Kawamura. On block grants specifically, as you would 
know, the State Departments of Agriculture, NASDA, in talking 
about block grants unanimously supported the success of those 
block grants and actually compiled a record from the 2001 block 
grant projects and put that together, showed that over $40 
million were leveraged against the $120-plus million that were 
originally given. And so the ability to leverage dollars to 
increase investment in many areas, whether it is research, 
whether it is marketing, whether it is access to foreign 
markets, these were all some of the success stories that came 
out of those block grants.
    In our own State, we were able to leverage almost a 60 
percent increase in terms of matching costs investments in 
block grants in our State, and this program was over-
subscribed. Many, many people had applied for those programs 
and we ran out of money, all of us, all the States. And so the 
distribution of those dollars, the investment that they 
created, and the return to the U.S. economy as, again, an 
investment, not a cost in this component of what a farm bill 
can be, is probably one of the most significant innovations, I 
think, that we are all excited about, and certainly we hope to 
see in a new farm bill.
    Senator Stabenow. That is great. It sounds like you 
leverage that very, very well. So we put in some dollars and 
then we are able to----
    Mr. Kawamura. There are not many other areas in government 
spending that you see that kind of partnership.
    Senator Stabenow. Thank you. Mr. Rice, did you want to 
respond?
    Mr. Rice. Yes, I did want to comment. I eliminated some 
comments in my oral testimony talking about the Block Grant 
Program, but it is interesting what the States have done with 
the block grant monies that were appropriated in 2001. They 
have, in many cases, taken very different routes which have 
produced some surprisingly good results.
    In Pennsylvania, we first raised the visibility of the 
local produce industry by promoting the local produce growers 
and then using State funds to actually try to connect our food 
service operators to buy from the local growers and supply it 
to our schools.
    An interesting project that was funded by the Block Grant 
Program in the State of Michigan you are probably familiar with 
was to improve the technology for making the fresh apple 
slices. They, in fact, ended up making a breakthrough in that 
technology, which is one of the reasons why I believe one of 
our largest fast food retailers has been very successful in 
selling fresh apple slices for the first time in all their 
restaurants.
    The State of Virginia used block grant money to set up and 
pass the rather arduous protocol set up by the country of 
Mexico to export apples into that country. They were able to 
meet that protocol and now Mexico is one of the more important 
export markets for Virginia.
    So it is a way of giving the States an opportunity to say 
what are their priorities, and where they have, in fact, used 
them, they seem to have produced very positive results.
    Senator Stabenow. Thank you, Mr. Chairman.
    Chairman Harkin. Thank you very much, Senator. Senator 
Chambliss?
    Senator Chambliss. Thank you, Mr. Chairman. I have got a 
question or comment I want to make here and I would like to get 
a comment from each one of you on it.
    The American Farm Bureau Federation is going to present 
testimony here tomorrow. Given the determination in the Brazil 
cotton case, the American Farm Bureau supports the elimination 
of the fruit and vegetable planting prohibition. They support 
eliminating the restriction on direct payments and continuing 
the restriction for countercyclical payments. The Farm Bureau 
concludes that a realistic amount of funding to compensate 
specialty crop growers for the elimination of the planting 
prohibition and the loss of direct payments on those program 
crop acres is $250 million annually.
    Their testimony goes on to suggest that one approach would 
be to invest this amount in specialty crop conservation 
programs. Specifically, the Farm Bureau recommends a $250 
million annual increase in EQIP for fruit and vegetable 
producers as well as earmark 17 percent of all mandatory EQIP 
funding for fruit and vegetable production.
    I am curious to hear your comments on all of this. This 
issue is going to be somewhat controversial, the issue on 
planting flexibility, as we get into this farm bill. Bill, let 
us start with you and just give me a comment what you think 
about the planting flexibility issue and their proposal on this 
$250 million.
    Mr. Brim. Well, I think the proposal of the $250 million is 
a drop in the bucket to what we will lose if the planting 
flexibility is not held to. Also, the possibilities of them 
building up conservation, I agree with. I think that is a great 
idea. But with the $250 million, we will lose at least our 
first year $3.1 billion if we don't hold them on the 
flexibility.
    I would like to see you do some more research on it before 
you vote and make sure that you hold them to the flexibilities 
for us in fruit and vegetables because we have got so many 
things that we can lose, and that is just in the first year. 
With the situation with our growers in Georgia right now, with 
the disasters they have had in the last couple of years, they 
don't need any obstacles to have to overcome after those couple 
years.
    Senator Chambliss. [Presiding.] Mr. Rice?
    Mr. Rice. I think I would defer to Maureen Marshall. 
Certainly, the apple industry is completely in tune with the 
United Produce Association with regard to flex acres. We think 
it would make it very difficult for us to compete with a part 
of agriculture that we haven't had to compete with before. It 
is hard enough to compete with ourselves.
    Senator Chambliss. Mr. Kawamura?
    Mr. Kawamura. Although our State certainly would encourage 
an increase in the conservation title and the EQIP Program, we 
have been very strongly against the flex acreage elimination. 
We struggle enough many times thinking that we are always 
talking about the proverbial level playing field when we talk 
about the international competition, but when we have an 
unlevel playing field within our own country, that is very 
difficult and that is a big struggle for us.
    When we look at specialty crops, however, in that flex 
title, there is always a new specialty crop emerging and we all 
recognize what that is. That is energy crops. And so part of 
the direction, the places people can go is certainly--and we 
hope--that the energy crop arena in all of its spectrum, 
whether it is biodiesel or bioethanol or any of the other 
products that are coming along, are all crops that we are 
excited about that people can transition to.
    But going back to the flex acreage, our State has always 
been and continues to be very strongly against the elimination 
of the flex program.
    Senator Chambliss. Ms. Marshall?
    Ms. Marshall. I have to echo my other panel members in what 
they have said, and as Bill has said, the impact on the family 
farm and individual farmer is going to be a whole lot greater 
than the $250 million. We do recognize we need the conservation 
programs and the EQIP Programs, but we need to maintain that 
flex acre program. As a farmer, it has been a business 
decision. We grow program crops. We are also fresh market 
vegetable. It is a decision that we made at the time of 
growing.
    To put it in plain language, to the program farm growers in 
my area, the grass looks greener on the other side of the 
fence, so they are going to go out and plant lots of easy-
growing specialty crops and they are going to flood the market 
and we are all going to turn out losing. I am going to lose 
more because they have program money coming on those acres if 
it is allowed to change.
    Senator Chambliss. Mr. Korson?
    Mr. Korson. I defer to Ms. Marshall. We are part of this 
coalition, as well, and while tree fruit growers are probably 
less impacted because of the trees that you plant in the 
ground, the vegetable component, we are partners in this 
project and so we support United's position on this.
    Senator Chambliss. It is a difficult issue and it sounds 
like something that ought to be easy to resolve, but as we move 
into a farm bill, my attitude has always been that we give our 
farmers the opportunity to begin in every new farm bill to 
decide which direction you want to go in. Ms. Marshall, you say 
you participate in program crops. Bill, obviously we have a lot 
of folks who participate in production crops as you do, as well 
as in specialty crops. It is a decision for each farmer and I 
am afraid it is one of those things that if we get away from 
the current program, we get more into mandating to folks than 
we do otherwise.
    Bill, I appreciate your comments here regarding the 
planting restriction. We have had the opportunity to discuss 
this in the past, at previous hearings, but since that time, 
the Informer Report that you mentioned has been released. What 
key message would you like to leave with the committee about 
this subject as we move closer to the farm bill?
    Mr. Brim. With the Informer Report being as conclusive as 
it was, I think it would be disastrous for us in the fruit and 
vegetable industry and in the specialty crop industry to not be 
taken to task, but put us back in a safety net with these flex 
acres, because if we are not supported, we are going to lose. 
And if we don't--with different States receiving different DCP 
payments, the countercyclical payments, we all have to deal 
with that because, like I said, I am a program crop grower as 
well as a 4,000-acre vegetable grower. So we, as farmers, we 
can deal with that.
    But this Informer Report, it is going to hurt too many 
family farms and vegetable farms for us to do anything other 
than keep this safety net for us, whatever the WTO says or not. 
I mean, I think at some point in time we have got to say how 
important our farmers and how important is it to ruin those 
WTO.
    Senator Chambliss. All right. Thank you all very much for 
some very good testimony this morning.
    Ms. Marshall. Thank you.
    Chairman Harkin. [Presiding.] Again, thank you all to this 
panel for being here and for your wonderful testimony. Mr. 
Secretary, please take my regards back to your Governor and 
thank him for the job he is doing.
    Mr. Kawamura. Thank you, Senator.
    Chairman Harkin. Thanks. I will call our third panel, and 
this is the dairy panel, Mr. Jerry Kozak, Mr. Clint Fall, Ms. 
Connie Tipton, Mr. Eugene Robertson, Mr. Russell Redding, and 
Mr. Randy Jasper. I am informed that Mr. Redding is under the 
weather and will not be testifying today.
    I want to thank this panel for its patience in waiting so 
long to testify. We are constrained by the number of days 
around here when we can have our hearings and things because of 
everything else that is going on, so I had to try to get as 
much as I could in today.
    But again, another critical part of our agricultural bill, 
as it always has been, is the dairy portion. As I mentioned, it 
is one of the larger parts of our agricultural economy in 
America today. It is a very complex issue, very complex issue. 
I look forward to hearing your testimony. As I said, all your 
statements will be made a part of the record in their entirety, 
and we will go down the line.
    We will start, again, from this side over, with Mr. Jerry 
Kozak, National Milk Producers Federation. He is the President 
and CEO of the National Milk Producers Federation. He also 
serves as Executive Director of the American Butter Institute. 
Mr. Kozak prior to this had also been a high-level official 
with the U.S. Food and Drug Administration.
    Mr. Kozak, welcome to the committee and please proceed.

 STATEMENT OF JERRY KOZAK, NATIONAL MILK PRODUCERS FEDERATION, 
                      ARLINGTON, VIRGINIA

    Mr. Kozak. Thank you, Senator Harkin and those of your 
colleagues who are remaining. I appreciate the opportunity this 
morning to provide testimony to present ideas on the future 
direction of dairy farm policy. I am Jerry Kozak, President and 
CEO of the National Milk Producers Federation in Arlington, 
Virginia.
    My testimony today focuses on the proper role for the 
Federal Government in assisting the domestic dairy industry 
through the upcoming farm bill. This is obviously a critical 
issue for all dairy farmers from coast to coast. The formation 
of the Federal farm policy must take into account and balance 
many different and sometimes competing factors: The needs of 
producers and consumers, the budget, political priorities, 
trends in domestic and international markets, animal and public 
health prerogatives, and others. The final result is inevitably 
a synthesis of ideas.
    For the upcoming farm bill, the National Milk Producers 
Federation has strived to achieve the same type of balance and 
synthesis. We are taking ideas that have been successful in the 
past and, where appropriate, building on them. Our policy 
recommendations are intended to help the dairy producer sector 
in the future. Farming and food production is evolving and so, 
too, must Federal policies evolve to reflect new realities.
    The members of National Milk have deliberated for more than 
a year on the best path to take in the future. Last winter, we 
held regional sessions called our Dairy Producer Conclave 
Meetings to obtain direct input from farmers and to get them to 
discuss the pros and cons and various approaches. These farmers 
not only represented National Milk members, but also we had 
producers from all other State and national dairy 
organizations. That input was then analyzed by our Economic 
Policy Committee, which last fall and winter developed a 
detailed series of proposals. Our outside advisor, Mr. 
Chairman, was Bruce Babcock from Iowa State University, and 
although Bruce was not a dairy expert, we felt it incumbent to 
get new views from different experts.
    The resulting proposal is a reflection of a broad-based 
membership and was achieved through collaboration, compromise, 
and ultimately consensus. NMPF recognizes that one dairy 
program cannot meet the needs of all dairy producers, and as a 
result, we firmly believe in a multi-faceted approach and that 
it is necessary in order to create a more effective market-
oriented safety net. Our plan was created with extensive input 
and discussion by dairy producers throughout the nation, taking 
in consideration the concerns of producers of all sizes and in 
all regions of the country.
    The end result of these extensive considerations is a far-
ranging package of individual proposals. Each is important in 
its own way and each deserves to be included as part of the 
farm bill package. Here are the specific hallmarks of our 
proposal.
    It is fair and equitable, without regional biases. All 
farmers are treated equitably. It is predictable and allows for 
better planning and fewer market uncertainties. It is market-
oriented and acknowledges the fact that signals about supply 
and demand should be delivered to farmers. It establishes a 
true safety net, ensuring that the Federal Government is there 
when needed, but at the same time, it doesn't provide undue 
price enhancement. It is forward-looking, with new initiatives 
acknowledging new technologies in our changing industry. It is 
compliant with our WTO commitments and we feel beyond 
challenge. It is comprehensive because it addresses all areas 
affecting dairy production. Last and certainly not least, we 
believe it is politically practical. This package has been 
thoroughly debated within our entire membership, and because of 
the breadth of our membership, I feel confident in presenting 
to you a wide-ranging package for your committee's 
considerations.
    I am also pleased to say that our proposals are very much 
in concert with some of the USDA proposals and that hasn't 
happened very often. But they even go further in suggesting 
changes and refinements to current programs.
    A summary of our farm bill proposals has been included. The 
current Milk Price Support Program would be replaced by a 
program that supports specific dairy product prices, improving 
the effectiveness and predictability of this critical 
government safety net. The current MILC payment would be 
replaced by a direct payment program that delivers a regular, 
consistent payment to farmers decoupled from price and future 
milk production output in order to help them plan and budget in 
this new high cost of production environment. The farm bill 
needs to take measures necessary to ensure the implementation 
of promotion checkoff on imported dairy products that was 
included in the 2002 farm bill but never implemented by USDA.
    Through additional Federal investments in bioenergy 
research and initiatives, dairy producers will be able to 
capture the energy value of their animal waste systems, which 
will help improve air quality, soil quality, and greater 
sources of renewable energy.
    Conservation programs--expanding the scope and funding of 
both Environmental Quality Initiatives and Conservation 
Security Programs to help dairy producers implement practices 
that improve their environment and conserve natural resources.
    The importance of dairy products in our diet has also been 
cited in our proposals. Federal dietary guidelines must enhance 
the role of dairy foods in Federal feeding programs. The 
government must also maintain funding to control animal 
diseases such as brucellosis, bovine tuberculosis, et cetera.
    We are also proposing to help expand our overseas markets 
for U.S.-produced dairy products and it has played a crucial 
role in a number of farm bills.
    Finally, we include a risk management tool for producers 
through the creation of a forward contracting program, provided 
that certain producer safeguards are included and that this 
should not be permanent and should fit with the program before 
reauthorizing.
    The full package, Mr. Chairman, of detailed descriptions 
has been sent to everybody in the House and the Senate 
yesterday and we look forward to working with you and your 
staffs to bring about a successful dairy producer bill.
    [The prepared statement of Mr. Kozak can be found on page 
169 in the appendix.]
    Chairman Harkin. Mr. Kozak, thank you very much for your 
testimony.
    We have a vote on right now and the second bells have just 
started, so I am going to have to recess while I run over and 
vote and we will be right back. The committee will stand in 
recess for a few minutes.
    [Recess.]
    Chairman Harkin. The committee will resume its sitting.
    Now we turn to Mr. Clint Fall of the Midwest Dairy 
Coalition of Litchfield, Minnesota. Mr. Fall is President and 
CEO of First District Association, an independent dairy 
cooperative in Litchfield, Minnesota. He is here today to 
testify on behalf of the Midwest Dairy Coalition.
    Mr. Fall, welcome.

 STATEMENT OF CLINT FALL, MIDWEST DAIRY COALITION, LITCHFIELD, 
                           MINNESOTA

    Mr. Fall. Thank you very much, Chairman Harkin and members 
of the committee. My name is Clint Fall, President and CEO of 
First District Association, and I thank you very much for this 
opportunity.
    First District Association is a dairy farmer-owned 
cooperative located in the small town of Litchfield, Minnesota. 
Our co-op's 1,200 dairy farmer members produce approximately 
1.7 billion pounds of milk each year. Our single cheese 
manufacturing plant is a very modern and efficient operation 
and is the largest cheese plant of any facility east of the 
Mississippi River.
    We strongly believe United States dairy farmer-owned 
cooperatives are critical to the dairy processing sector. In 
Minnesota and Wisconsin, approximately 85 percent of the milk 
is marketed through cooperatives. First District is a member of 
a Midwest Dairy Coalition and the National Milk Producers 
Federation. We strive to be active in supporting Federal dairy 
policy that benefits dairy farmers.
    The structure of a Federal dairy policy plays a significant 
role in the status of the Upper Midwest dairy industry, 
although not always in the most equitable way. Whether it is 
the ongoing structure of the Federal Milk Marketing Order 
System or past experiments with regional dairy compacts, 
Federal dairy policy has often placed the upper Midwest at a 
competitive disadvantage by artificially inflating Class I 
prices that ultimately places downward pressure on manufactured 
milk prices. Since approximately 85 percent of the milk in the 
Upper Midwest is used in manufacturing, such policies are 
detrimental to the Upper Midwest region.
    I would like to make several points about programs that we 
believe are important to our dairy farmers. No. 1, the Milk 
Price Support Program. Without a doubt, the Milk Price Support 
Program is an important program and should be continued, but it 
is in need of reform. The current price support level of $9.90 
per hundredweight has proven to be a porous and ineffective 
floor. In recent years, the Class III price has fallen below 
the $9.90 support price on many occasions, falling as low as 
$8.57 in November of 2000. Contrary to the intent of the 
program, dairy manufacturers are reluctant to sell surplus 
product, particularly cheese, to the Commodity Credit 
Corporation, in large part because the costs are significantly 
higher than selling to the commercial market.
    To more adequately reflect these costs, we are interested 
in the new proposal by National Milk Producers Federation to 
legislate individual CCC purchase prices for butter, powder, 
and cheese instead of having one overarching milk price support 
of $9.90 per hundredweight. We believe this is a step in the 
right direction to help assure that the Price Support Program 
functions more effectively as a true safety net.
    No. 2, the Milk Income Loss Contract Program. Because of 
the inadequacy of the Milk Price Support Program, we argued 
during the last farm bill debate for an additional program to 
provide a more credible safety net for dairy producers. 
Fortunately, others agreed. The countercyclical Milk Income 
Loss Contract Program that emerged out of the 2002 farm bill 
has proven to be a very effective safety net for dairy farmers. 
Assistance is only provided when the market prices fall below 
target levels. We have proposed that the MILC Program be 
reimplemented without a diluted formula as it originally 
emerged from the 2002 farm bill.
    Congress also sought to limit the taxpayer costs of the 
MILC Program by placing a volume cap to limit the benefits to 
the first 2.4 million pounds of production per year. Roughly 82 
percent of all dairy farms in the Nation receive full benefits 
of the MILC Program and are fully covered under this cap. Yet 
even those that exceed the cap receive great benefits.
    For the Upper Midwest specifically, there is no doubt that 
this program has helped maintain many family dairy operations 
in rural communities during low milk price cycles. It is 
critical that the MILC Program or a similar type of 
countercyclical or direct safety net program be continued in 
the new farm bill.
    No. 3, trade policies. We must review our trade policies 
and those of our trading partners to assure that we have 
consistent and rational policies as we move into the future. 
Specifically, during the Uruguay Round of WTO trade 
negotiations, tariff rate quotas were placed on imports of 
traditional dairy product classes such as cheese, butter, and 
nonfat dry milk. Yet we failed to recognize emerging trends 
with regard to milk protein concentrates and we failed to 
create tariff rate quotas on these milk protein concentrates. 
As a result, we have seen instances during which MPC imports 
into the United States have surged, negatively affecting 
farmers' milk prices and adding to taxpayer costs.
    In conclusion, as the committee works on the 2007 farm 
bill, we ask for your support for a two-pronged safety net as 
represented by an improved Dairy Price Support Program and the 
continuation of the MILC Direct Payment Program. Thank you very 
much for your time.
    [The prepared statement of Mr. Fall can be found on page 
143 in the appendix.]
    Chairman Harkin. Thank you very much. I want you to know 
that I am not listening to some strange music or something on 
this device.
    [Laughter.]
    Chairman Harkin. The acoustics in this room are so bad, we 
have a loop system in here and this device really clarifies 
everything so I can hear better sitting up here.
    Next, we turn to Ms. Connie Tipton, who is President and 
CEO of the International Dairy Foods Association. She is no 
stranger to this committee. She has been here many times in the 
past.
    Welcome again, and please proceed, Ms. Tipton.

     STATEMENT OF CONNIE TIPTON, INTERNATIONAL DAIRY FOODS 
                  ASSOCIATION, WASHINGTON, DC

    Ms. Tipton. Thank you, Chairman Harkin. We have, I think, 
what is an unprecedented opportunity with this farm bill 
because we have growing global demand and domestic demand for 
our U.S. dairy products and we have an opportunity because of 
that to transition to a better safety net for our nation's 
dairy farmers. Let me just say it is important to us that we 
have programs that are helpful and provide opportunities for 
both producers and processors in the dairy sector.
    Also, I would like to start off by saying that we support 
putting in place an effective safety net for our dairy farms. 
We have five suggestions: Provide a safety net for farmers that 
will give help under a variety of market conditions, not just 
when prices are low; encourage environmental improvements on 
farms with direct payments that aren't tied to price or 
production; reinstitute forward contracting so that dairy farms 
and milk buyers can enter into voluntary agreements; eliminate 
the Dairy Price Support Program and the Dairy Import 
Assessment; and establish a commission of industry stakeholders 
to identify and recommend measures for addressing the many 
complex problems with the Federal Milk Marketing Order System.
    Now, I would point out that the context for these 
suggestions is radically different. It is a radically different 
dairy marketplace than we have really ever seen before. We have 
milk prices that are expected to go to record high levels this 
year. That is largely driven by demand for exports of high-
quality milk proteins, wheys, lactose, and those exports, Mr. 
Chairman, are commercial market exports without subsidies. This 
is a new thing for dairy in the last few years and it is a very 
important phenomena and something we need to take advantage of 
in rewriting our policies.
    The demand is expected to remain strong for the foreseeable 
future, so that extends that opportunity. But ironically, at 
the same time, our dairy farms are still going to be stressed 
because of record high feed prices and our current safety net 
programs, the Dairy Price Support Program and the Milk Income 
Loss Contract Program, are not going to be useful or effective 
in this marketplace.
    The Dairy Price Support Program buys basic commodities to 
prop up market prices. But there is more to it than that 
because it encourages production of these commodity products. 
It provides a guaranteed market for them. So of course, it is 
easier to keep producing those for the government than it is to 
retool and produce for the market. This has kept the dairy 
industry from responding adequately to the exploding demand for 
higher-value dairy proteins. And today, with record high milk 
prices, the Dairy Price Support Program offers no help to 
producers, yet it continues this commodity production 
mentality, and that is why we think this is a good opportunity 
to eliminate rather than resuscitate the Dairy Price Support 
Program.
    Now, I would like to stress that I think it is really 
important that we have adequate resources to give dairy farmers 
the safety net they need, and I know everyone comes to your 
committee saying they need resources, but it is very important 
for our industry to have an effective safety net.
    We suggest providing assistance that is not tied to price 
or production and using these payments to encourage 
environmentally sustainable practices on our dairy farms, and 
then complement this with risk management tools for dairy, like 
revenue insurance and forward contracting. It is vital to our 
members that we keep our abundant and high-quality milk supply, 
and we have a chance in this farm bill to do that with updated 
policies that allow markets to work better, including 
international markets for our dairy products from the U.S.
    Now, there was a provision included in the 2002 farm bill 
that called for a new assessment on dairy imports and that was 
never implemented. We believe that now, our trade prospects 
have changed so dramatically that our approach on this issue 
should change, as well. As our exports are growing and driving 
better prices for our producers, we think it is absolutely the 
wrong time to put up new barriers to other countries' imports.
    Finally, just about every segment of the dairy industry is 
currently frustrated with the Milk Marketing Order System and 
wants to see some change. That system, however, is so 
complicated that it is hard to find consensus about what those 
changes might be. Both our organization and the National Milk 
Producers Federation have set up committees to review all of 
these issues and try and find consensus within our 
organizations, but we believe it would be useful for Congress 
to call for a blue ribbon commission made up of industry 
stakeholders and experts to try and find a consensus across the 
industry for long overdue change to the Federal Milk Marketing 
Order System.
    I know that dairy policies have always been one of the most 
difficult areas to navigate, but I am optimistic that our 
strong market opportunities this year will provide the chance 
for the committee to come up with positive improvements. Thank 
you.
    [The prepared statement of Ms. Tipton can be found on page 
217 in the appendix.]
    Chairman Harkin. Thank you very much, Ms. Tipton. I will 
follow up with you on a couple of questions on forward 
contracting later.
    Now we turn to Mr. Eugene Robertson, Pine Grove, Louisiana. 
Mr. Robertson and his son operate a 150-cow dairy in Pine 
Grove, Louisiana. His son has a separate dairy operation, as 
well. Mr. Robertson is a member of Dairy Farmers of America 
Cooperative and is testifying today on his own behalf.
    Mr. Robertson, welcome.

      STATEMENT OF EUGENE ROBERTSON, PINE GROVE, LOUISIANA

    Mr. Robertson. Thank you, Mr. Chairman, for the opportunity 
to be here today to testify. As you were saying, I am Eugene 
Robertson from Pine Grove, Louisiana. I have been in the dairy 
business for 46 years. My son, as you said, is in the dairy 
business in the operation that we have on my family farm in 
addition to his own dairy.
    I guess in the 46 years I have been in the dairy business, 
we have never seen the price of milk going as low as it is 
going now and the fluctuation of the high points and the low 
points. The trough seems to be getting deeper, although as we 
have been hearing, we are going to see improving prices and we 
have experienced them already in 2007. We know they are going 
to be going higher. But the price of the feed that we heard 
about and the fuel cost is eating this margin up about as quick 
as we get it.
    Our dairy industry in Louisiana, of course, was severely 
impacted by Hurricane Katrina in 2005. We had some awful hard 
weeks and months afterwards of the loss of power and the loss 
of our crops and the interruption of the feed supply and the 
health problems that we never even thought of after the storm 
that we had to face for many months there.
    I am well pleased to have the opportunity to discuss with 
the committee today the issue of the Milk Income Loss Contract 
payments that the producers in our State have received for the 
last 6 years and the value of other Federal dairy payments that 
we have received.
    It is important for this committee to note that Louisiana 
is a milk deficit State, which means that we do not produce 
enough milk in our State to satisfy the needs of our consumers. 
We probably bring in 25 to 30 loads of milk per day in 
Louisiana to help meet these needs. So it is critical to 
maintain what milk production that we do have and the existing 
dairy operations in our State.
    I would like to place into context my comments on the MILC 
Program, on some history that led Congress down the road toward 
the development of the Milk Income Loss payment in the 2002 
farm bill. Our State, along with other States in the South, had 
been working on ideas that would help dairy farmers get through 
the periods of time when milk prices were low. We needed a 
countercyclical payment that would help offset reduced blend 
prices and keep us financially solvent. That is one reason 
Louisiana passed enabling legislation to join a Southern Dairy 
Compact Region. However, since the legislation to ratify the 
compact was not passed by Congress, the MILC program was put 
forward as an alternative measure.
    From 2002 through 2007, the dairy farmers in my area have 
received $9,977,000 in payments from the MILC. Our State now 
has approximately 200 to 250 dairy farms, according to USDA 
statistics. But between 2005 and 2006, we lost almost 11 
percent of our dairy operations, and this trend is not letting 
up. It is getting worse in the last several years, and of 
course by Katrina, that has really caused things to get 
difficult for us.
    The MILC program has helped, although I believe it can be 
improved. The trigger price of $16.94 a hundredweight based on 
the Class I price in Boston is too low and does not reflect the 
high feed and energy costs that we are facing today. The 
payment rate of 34 percent based on the Class I utilization 
does not come close to reflecting our fluid utilization rate in 
the South. I would hope the committee takes these factors into 
account when you are preparing the dairy title of the bill for 
2007.
    The MILC payments could fall in the Amber Box under the WTO 
rules. In terms of direct payments to dairy farmers that the 
committee will be considering during the preparation of the 
farm bill, I would like to point out that National Milk 
Producers Federation is proposing a direct payment to dairy 
farmers that would offer a solution to the WTO requirements. In 
their proposal, the direct payments would be Green Box 
compliant with the WTO requirements.
    There are a number of other issues that are very important 
to us in the South, as well, and I would like to briefly touch 
on them. We are part of the Southeast Federal Milk Marketing 
Order Area. The Federal orders need to have some significant 
changes if they are to work efficiently for producers in the 
future. One of the main purposes of the Federal Milk Marketing 
Orders, as you know, is to guarantee a fresh supply of milk for 
the consumers in the areas. However, in practice, the Federal 
milk orders do not always accomplish this goal in assuring a 
fresh supply of milk and at the same time adequately reflecting 
price to the dairy farmers. One example is the feed cost and 
how it has gone up.
    Another thing I want to point out is not only Louisiana, 
but the whole Southeast part of the United States, as you are 
aware of, is a deficient area of milk. DFA, the co-op that I 
ship my milk to, on an average daily basis, we have sales for 
approximately 900 million pounds of milk and we only produce 
630,000 pounds of milk in the area. This is putting a great 
burden on us by doing this.
    I am sorry, just one other point, that we just need to have 
a process in the Federal Milk Order that would address this and 
I will quit there.
    Thank you, sir. I appreciate your time and I will be 
pleased to answer any question.
    [The prepared statement of Mr. Robertson can be found on 
page 214 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Robertson.
    Now we turn to Mr. Randy Jasper, National Family Farm 
Coalition, Muscoda, Wisconsin. He and his son, Kevin, milk 100 
cows, raise 2,000 acres of corn and soybeans along with 200 
acres of hay in Wisconsin. He is a member of the American Raw 
Milk Producers Pricing Association and speaks today on behalf 
of the Dairy Subcommittee of the National Family Farm 
Coalition.
    Mr. Jasper, welcome to the committee. Please proceed.

  STATEMENT OF RANDY JASPER, NATIONAL FAMILY FARM COALITION, 
                       MUSCODA, WISCONSIN

    Mr. Jasper. Thank you. Our program comes at this a little 
bit different. We come at this from the standpoint of the mark 
of getting the money from the industry. I will just outline a 
few things and go over a few other things.
    Dairy producers throughout the country need a policy that 
results in dairy farmers receiving cost of production plus a 
return on investment; access to affordable credit with fair 
terms; competition restored to a non-competitive dairy market, 
and that is a real big issue; protection from predatory 
practices of the largest corporations, including the largest 
dairy co-ops; protection of integrity of dairy products, 
meaning no support to domestic milk protein concentrates, MPC, 
or for any MPC used in our food supply; prohibiting of forward 
contracting; promotion of smaller co-ops and increasing 
oversight of co-op management to ensure interests of processors 
being met. Our plan, it is outlined in our full testimony that 
you received. The money comes from the government--or, excuse 
me, from the industry, not the government.
    My milk and my son's milk go to a small co-op called Scenic 
Central that we formed. Within two-and-a-half to 3 years, we 
put on 250 farmers. We send 19 million pounds of milk a month. 
We return 98 percent of every dollar that goes out goes back to 
the farmers. This was very hard to do. There are a lot of rules 
that you have in place against starting a market in the agency. 
That might want to be looked at.
    The crisis that we saw on dairy farmers large and small 
throughout America in the past year, when rising costs of 
production combined with weather disasters, continued low milk 
prices, there is just no way that anybody can stay in business. 
In real dollars, it has been the worst year for dairy farmers, 
including the Great Depression. We set up conference calls. 
This program was put together after real long hours and there 
are farmers from 20 States that have put this together, sorting 
out things we can do.
    On February 20, 2007, the NFFC delivered a letter to USDA 
Inspector General Phyllis Fong identifying problems with the 
inaccurate pricing reporting in the NASS survey. This situation 
is costing dairy farmers millions of dollars a month. Our 
understanding is that the Inspector General is currently 
involved in this investigation.
    And one thing I come at this a little different 
perspective, where we do a fair amount of corn and beans. The 
problem with dairy farm money is not high grain prices. Grain 
prices are not high, people. They are somewhere in the vicinity 
of where they belong. They have been terribly low for years and 
years.
    Another thing that I have just jotted in here, I heard a 
lot about healthy food in the schools. Well, milk is a very 
healthy food and we need to make sure we keep that one in the 
schools.
    With our program, we need a price support system that 
allows dairy farms a fair price through the current Class III 
and IV hearings and with our legislative proposal for the 2007 
farm bill for the Family Farm Act. The solution is a fair 
price, a fair price for dairy farmers and for farmers who raise 
program crops and a non-recourse loan program with price floors 
that respect a farmer's cost of production, farmer-owned, 
humanitarian and strategic reserves, incentives for 
participation in conservation programs, and international 
cooperation in supply management. Years of distressed grain 
prices have fueled expansion of mega-dairies and forced 
thousands of dairy farmers and their diverse family operations 
out of business.
    One thing I heard earlier today, the price support at 
$9.90, while that helps a little bit, it is so low that it just 
prolongs the inevitable. No farmer can produce milk for $9.90 a 
hundred. The USDA statistic as of right now in the State of 
Wisconsin, February 2007, says $23.68 per hundredweight. On our 
dairy farm, we receive $14 to $16 per hundredweight. So we need 
a realistic price on that one. When the new program went into 
effect, milk prices fell on our farm about $3 a hundred and 
their support price gave us back about a dollar of that. Now, I 
am no genius, but if you lose $3 a hundred and you give me a 
dollar back, I still have a net loss of $2 per hundred. So it 
is something that needs to be tweaked so that part doesn't 
happen.
    We are also losing, the Senator has mentioned, we are 
losing out here in Pennsylvania, losing $5 per hundredweight. 
That is about what we are losing, and for those of you, a 
hundredweight is 12 gallons of milk. I don't know if too many 
people are aware of that.
    So the price support thing needs to be on there, but we 
need to set a formula that gets the industry to pay what milk 
costs. We worked with ARMPPA. ARMPPA is a marketing agency in 
common through the Cooper Bluffs. We talked to many of the 
processors and they all stated it doesn't matter what they pay 
for milk, whether they pay $12 a hundred or $17 a hundred. As 
long as they are all paying it, they are fine with it. They 
just can't be put in a competitive disadvantage.
    So if it is through a different formula, and the USDA has a 
formula. Every so many months, they put out a formula that says 
what the cost is to produce milk. I don't know why we don't 
just use that. Thank you.
    [The prepared statement of Mr. Jasper can be found on page 
152 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Jasper. I thank 
this panel for your testimony and for your patience in being 
here today.
    I want to commend at least the National Milk Producers 
Federation for putting forth the comprehensive set of farm 
proposals. I am not saying that I am absolutely supporting 
them, I say I commend you for doing that, and I want to take 
advantage of the expertise of this panel to get your reactions 
to those proposals. Have you all had a chance to look at those 
proposals?
    What I would like to know is, first, about the price 
support proposal. How would separate support prices for cheese, 
butter, and nonfat dry milk affect the price that dairy farmers 
receive for milk? How would it affect the prices that the dairy 
farmers receive if you had separate prices for each because 
farmers are not producing butter and nonfat dry milk and 
cheese. They are producing milk. Any thoughts on that? Mr. 
Kozak?
    Mr. Kozak. Yes, Mr. Chairman. One of the things that I 
think we have to remind ourselves about the Price Support 
Program, it is a market clearing mechanism. It is only there as 
a safety net. It is only there when the bottom drops out, and 
the Price Support Program has been effective over the years, 
but there have been some situations where, for instance, cheese 
dropped down to $8.70 in 2003 when we had the lowest milk 
prices in our 25-year history and it wasn't effective.
    So what we have done in terms of recalculating the Price 
Support Program is to recognize that it is a market clearing 
mechanism of which, when prices are extremely low and we have 
some surpluses, the government buys those products at a 
specific level. It doesn't buy all milk products. It doesn't 
buy fluid milk. It doesn't buy yogurt, cottage cheese, et 
cetera. It buys those three specific products because those 
three specific products are the basic foundations of what we 
produce ultimately in this country and are tied to our over-
quota tariff rates.
    Chairman Harkin. Mr. Kozak, what does it do to the farm? 
Does it affect the price farmers receive?
    Mr. Kozak. Absolutely, because it gives at least some firm 
foundation that says that if we are in that kind of period of 
time, prices won't drop below that. By recalculating what we 
have done, we believe that it is going to be an effective 
safety net that provides at least some floor, if you will, from 
the Federal Government.
    Chairman Harkin. Mr. Fall, you said you were very 
interested in this proposal.
    Mr. Fall. Yes.
    Chairman Harkin. We are all interested. I just don't know 
how you feel about it.
    Mr. Fall. We are interested and, for the most part, I think 
we believe that there needs to be something done. We don't want 
to see the support program go away. Like Mr. Kozak commented, 
it functions as a safety net in the worst case scenario where 
it basically clears surplus product from the marketplace. There 
is no farm that can actually survive at $9.90 equivalent milk 
price, but if in the event milk prices go that low, it 
generally occurs because of a surplus of dairy products, 
commodities that are in the marketplace.
    So we support the idea of changing the support program in 
some way to help it to work better. We believe that the 
measures that National Milk is pursuing, we believe that that 
is probably a step in the right direction toward achieving that 
objective.
    Chairman Harkin. Ms. Tipton?
    Ms. Tipton. Mr. Chairman, I would argue exactly the 
opposite. I think keeping the Dairy Price Support Program with 
our current market conditions will do nothing but put a 
dampening effect possibly on our U.S. dairy prices, and that is 
because we have growing global demand for the foreseeable 
future. People think we are going to be selling these higher-
value dairy proteins both here in our own markets, but on 
international markets. We are selling whey proteins. We are 
selling lactose to Japan. We are selling more and more of these 
non-fat dry milks, whey proteins over to China. We have lots of 
market opportunities right now and it is driving our prices up 
for U.S. dairy farmers. As I mentioned, we are going to see 
record high milk prices for our U.S. dairy farmers this year.
    Keeping a program that encourages people, encourages the 
producers of products that aren't in demand in the market, just 
so they can sell them to the government and maybe make a few 
cents' profit, is not going to help dairy farmers. It is going 
to maybe keep that company in business who wants to crank out 
non-fat dry milk instead of upgrading their facility, but I 
think we should encourage people to upgrade their facilities 
and go for these higher-value dairy markets that are going to 
actually drive prices to a better level for our farmers.
    I just see this as a great opportunity for us to relook at 
these things and get out of this situation. Corn had a Price 
Support Purchase Program years ago and when they started having 
global market opportunities, they got rid of it, too. I think 
it is time for us to do that with dairy and go for the market. 
I think we have a great opportunity there.
    Chairman Harkin. Thank you, Ms. Tipton.
    Mr. Robertson?
    Mr. Robertson. I have no comment. I will have to go along 
with what Mr. Jerry Kozak said.
    Chairman Harkin. Mr. Jasper, you already said that you were 
not in favor of----
    Mr. Jasper. Right. Right now, according to USDA's 
statistics, we import more dairy products than we export, so we 
are actually a deficit nation right now. So while I am not 
against exports, I don't think they are necessarily the answer.
    Chairman Harkin. The National Milk also proposes to replace 
the Milk Income Loss Contract, the MILC Program, with a program 
with fixed payments based on the 85 percent of the producer's 
past milk production. Now, again, it would seem to me that the 
proposal would be more generous to larger producers and more 
costly than the current MILC Program. New dairy producers would 
not be eligible for payments. So how would beginning dairy 
farmers compete against established dairies that would receive 
monthly payments, I ask? Mr. Kozak?
    Mr. Kozak. Mr. Chairman, first of all, let me point out 
that the current MILC payment would be considered to be in the 
Amber Box for WTO purposes, and although I understand that some 
of the people up here feel that there is not going to be a Doha 
Round or we shouldn't be really addressing these issues, our 
organization didn't feel that way. We felt that it was 
important to look at the future. So the first thing we did was 
to put together a program that wouldn't fall in the Amber Box.
    Second, we put together a program that would try to create 
some equality that the MILC payment doesn't have at the present 
time. If you take a look at how the MILC payment functions, it 
is a countercyclical payment. It only kicks in when prices are 
at a certain level or when the bottom drops out. But look at 
the situation we are in right now, when we have got high energy 
and feed costs, record high energy and feed costs for 
producers, and you have heard that from some of the panel 
members and our producers, the MILC payment will not--there 
will be no MILC payment for the rest of this year because of 
the way of its nature.
    So our Green Box payment addresses inflation, addresses 
feed costs. It is more predictable. We calculate that it will 
cost the equivalent to what the MILC payment----
    Chairman Harkin. Excuse me for interrupting. How would 
beginning dairy farmers compete, because they would not be 
eligible for payments.
    Mr. Kozak. Well, at the present time, we are looking at a 
refinement to that, Mr. Chairman, to see how we can incorporate 
that, because under the strictures of WTO, you can't tie it to 
production, so if a farmer doesn't have a historic production, 
he is not eligible, but we are committed to working to try to 
resolve that particular issue as part of our plan.
    Chairman Harkin. Ms. Tipton, you talked about forward 
contracting. Mr. Jasper, in your statement, your group was 
opposed to forward contracting, but let me ask this question. I 
mean, why is forward contracting so bad if a farmer knows what 
he can contract for and he can get an assurance of a price 
forward? It seems to me that he could either contract all or a 
part as a hedge. What is wrong with hedging a little bit if you 
know you can lock in a price? I just don't understand why you 
would be opposed to forward contracting.
    Mr. Jasper. Well, in our program, the National Family Farm 
Coalition proposal, it is based on the cost of production, so 
you wouldn't know ahead of time what you are going to get 
anyway. Our program states four times a year it would be looked 
at. Four times a year, the price would be adjusted to the cost 
of production. So there would be no need for any forward 
contract. You would already know for the next quarter what you 
were going to receive.
    Chairman Harkin. But still, though, you don't know what the 
market is out there. I mean, you can make a guess on it, 
perhaps, depending upon certain conditions, but I don't think 
this committee or anyone is going to set up a program that 
basically is a government payment program regardless of what 
market prices happen out there. There may be some subset of 
that in terms of a small payment as a safety net or something 
like that, but nothing in there that is going to guarantee some 
kind of a market type of a price.
    So dairy farmers always have to think about what the future 
markets are, and that is why I just don't understand why you 
wouldn't--as long as the contracts are transparent and as long 
as they are open, as long as they are dealt with on an arm's-
length basis, and as long as the producer has adequate time to 
consider the contracts--we are going through this right now in 
other parts of agriculture, by the way, and as you know, I have 
a competition title, a competition bill in right now that deals 
with a lot of contracting problems that livestock producers 
have, especially our pork producers, cattle producers have with 
contracting.
    But as long as you have an open system and it is 
transparent, I just don't see any reason why you--I don't 
understand the opposition to forward contracting.
    Mr. Jasper. Well, first off, like I say, you wouldn't need 
it because you would already have your forward contracting 
based with each quarter setting the price, and the price 
wouldn't come from the government. The price would be set 
through a formula by the government that said industry pays, we 
will say, $16 or $18 a hundredweight for milk. Everybody pays 
the same. That is the price. I mean, the power company is 
regulated through the government. They say what they need for 
power and that is Okayed by the government that they can charge 
that much.
    So you are able to do that, and that would eliminate--the 
problem with forward contracting, you keep getting everyone 
forward contracts and it usually ends up lower. There is no 
reason, and right now that makes it look bad because there are 
forward contracts also for $12 that looked pretty good when 
milk was $11, but it turns out it is $3 or $4 below the cost of 
production now. So it didn't do the farmer any good.
    So there is really no--we don't feel there is any need for 
forward contracting. As long as the price is set quarterly for 
each quarter, there would be no need for it. You would already 
know what the price is.
    Chairman Harkin. How do you feel about forward contracting, 
Mr. Robertson?
    Mr. Robertson. Well, I would have to agree with Mr. Jasper. 
I would have to first admit I don't know a whole lot about it, 
but it would seem to me we would get caught in a situation like 
now where you had it at the end of the price and the feed and 
the fertilizer and all the costs went up so much and the price 
of milk is going up that you would lose some on that part. But 
I don't know enough about it to tell you, sir.
    Chairman Harkin. I understand. Ms. Tipton, I know you are 
in favor of forward contracting----
    Ms. Tipton. Well, let me just give you an example, Mr. 
Chairman. Reliability of income is very important. You know 
what your costs are. You know what your loan for the tractor is 
if you are on the farm and you know what your labor is and all 
of your other costs, but just to give you an example of the 
fluctuation in milk prices, in 2002, just over $12 on average 
for the year. In 2004, a little over $16. Last year, $12.90. 
This year, it is probably going to be more like $16.50. Those 
are big ups and downs and that is very hard to manage, and 
probably the smaller you are, the harder it is to manage.
    Dairy farming is very capital intensive. If you want to 
start a dairy farm and you know there is a farm in Lamars, 
Iowa, that was started to supply Wells Dairy out there--we 
visited with you about that--and they honestly couldn't have 
gotten the bank investment and so forth to start that farm if 
they couldn't have had a forward contract, and that was when we 
had the pilot program in place in the early 2000's. It enabled 
that farm to get into business. They were able then to use a 
local supplier to get their milk. It is just a simple matter of 
having reliability of income and I don't see what is so 
threatening about that.
    Chairman Harkin. You mentioned something about the new 
marketplace, something we haven't seen before. It really has 
changed. What if I were to tell you that they are now shipping 
fresh milk from California to Wells Blue Bunny Dairy?
    Ms. Tipton. I believe it.
    Chairman Harkin. And they are shipping milk from California 
to Wisconsin.
    Ms. Tipton. Right.
    Chairman Harkin. They have got better tankers and they can 
deliver the milk all over the country, so it is not like it was 
even 20 years ago. So again, I am wondering when even fluid 
milk--I am not talking about the manufactured processes--but 
fluid milk can go anywhere almost now. If you can get it from 
California to Wisconsin, you can get it from the Midwest to New 
York.
    Ms. Tipton. Well, you can get virtually anything in any 
grocery store in America today. Milk is no exception. You can 
get avocados here in Washington, DC, and they certainly aren't 
produced here, so----
    Chairman Harkin. So what does that mean on the milk order 
provisions that have been in law since before I was born?
    Ms. Tipton. It means they need to be looked at.
    [Laughter.]
    Chairman Harkin. Well, I am just wondering. It doesn't 
really ask us to take a look at the new regimes out there and 
what is happening with the transportation that we have today.
    We need to take a better look at our export-import 
situation, too. Ms. Tipton mentioned the new export markets 
that are opening up. From everything I have seen, international 
markets may grow substantially in the future. How much, I don't 
know--until other countries figure out that we are doing it and 
then they take advantage of it and start undercutting us, I 
suppose. Mr. Kozak?
    Mr. Kozak. Mr. Chairman, you bring up a good point and I 
want to make sure that we get this across today, is that there 
is a lot of rhetoric about exports, and I am hearing that some 
at this table, but we have our own self-help program that we 
instituted in 2003. Just this past year, dairy producers on a 
voluntary basis spent $40 million of exporting to over 30 
countries. But I want you to understand that while we need some 
basic safety net programs, our producer industry isn't just 
talking about exports, we are doing something about it, and I 
think that is a major achievement for producers all across the 
country. We do think it is an important tool, but let us put it 
in perspective. It is only 5 percent of our production.
    Chairman Harkin. It is not that large.
    I am going to yield to Senator Coleman, who will ask the 
final questions here.
    Senator Coleman. Thank you, Mr. Chairman. Mr. Chairman, I 
wanted to start by associating myself--I didn't hear all your 
comments, but everything I heard, your questions about forward 
contracting and how do we move forward here, your comments 
about kind of the changing nature of transportation and global 
markets and we have been doing things a certain way for a long 
time, with this new farm bill, it is a real opportunity to 
think about it. So I appreciate your leadership and I look 
forward to working with you and I commit to working with you on 
these issues.
    I want to first welcome Mr. Fall from Litchfield. I was at 
the Main Street Cafe on Saturday with a number of good dairy 
folks and came home with some good cheese, too, by the way. So 
I just want to welcome you here.
    Mr. Fall. Thank you.
    Senator Coleman. I have worked very closely with a number 
of folks on this panel, certainly Mr. Kozak and Ms. Tipton and 
working with the Midwest Dairy Coalition.
    One of the things that I really appreciate, dairy is a 
complex issue. It is one of the most complex in all of farm 
policy. And it is one, by the way, which my State, a big 
economic impact, I think about $3 billion. It is a big deal. It 
needs to be a big deal into the future, not just in the past.
    But I just want to indicate that I am optimistic about 
where I see some areas of agreement, and I have had private 
separate conversations. At some point, we will probably all sit 
in the same room, with the National Milk Producers, 
International Dairy Foods, Midwest Dairy Coalition. I think 
there are enough areas of agreement to move together, and so I 
think that is positive. A MILC-like program, we need a safety 
net. Direct Payment Program, reform of the Price Support 
Program in the farm bill.
    The forward contracting that we have discussed, and Mr. 
Kozak, you have moved on some of the forward contracting issues 
from our early discussion. You still have a concern about 
making it permanent. Can you talk about that a little bit?
    Mr. Kozak. Yes. Thank you, Senator. Well, as you know, we 
did move on it. When we started this process, we realized that 
this is a consensus document. This represents 33 co-ops with 
over 50,000 farmers who had some input into this program. And 
just like everything you do up here, it was our job to try to 
find consensus.
    We still have a good portion of our membership who have 
concerns about forward contracting, but to their credit, they 
came to the table and tried to solve the problem instead of 
coming up here and asking you to solve this problem. And so 
what we were asking for was a few provisions that would ensure 
the sincerity of the program as well as the integrity and the 
credibility of the program, and just like we have to do with 
all of our other dairy programs, the Price Support Program, the 
MILC payment, even some of our basic animal health programs, 
they all expire with the farm bill and they get looked at again 
to make sure that they are working, et cetera. I think that is 
a small price to pay for an organization coming to the table 
and willing to have some consensus and compromise.
    Senator Coleman. Some of you were talking about some of the 
producer protection pieces. Is that what you are kind of 
looking for as we move forward----
    Mr. Kozak. In fact, the Chairman mentioned a couple of 
them. One is we want to make sure that the contract is enforced 
by USDA, just like everything else. It is making sure that if 
the farmer does contract a price below the minimum price, that 
somebody ensures that the farmer gets it, there is some 
oversight.
    Second, we want some language to make sure that farmers 
aren't coerced into signing contracts. I think that is a 
critical piece. Again, I don't see that as a bureaucratic 
issue, but one that assures our farmers that they are going to 
get a fair shake.
    And third, that it sunsets so that we can have an 
evaluation, review it, but it is not a pilot program that we 
are offering. It is just that it would be a full part of the 
farm bill but would then sunset and have to be reviewed.
    Senator Coleman. Ms. Tipton, and I give my thanks to you. 
We have had some very good discussions about finding common 
ground and moving forward with our kind of shared interests 
here. Is IDFA open to some of the producer protection proposed 
by National Milk?
    Ms. Tipton. Well, we are certainly very heartened that they 
are willing to support a forward contracting program. As you 
know, we felt that a 5-year pilot program that was successful 
was probably a good enough bellwether to move forward with. We 
would like to see it permanent. Certainly, we are willing to be 
at the table and talk about it. We do think that the way it was 
set up in the pilot program worked fine. Everybody's contracts 
were filed with the market administrators. It doesn't seem to 
us that we need a lot more oversight of those, but we are 
certainly willing to talk about it and we are anxious to get 
some of these risk management tools out there so that everyone 
can use them.
    Senator Coleman. And again, I look forward to continued 
conversation, but I am certainly very pleased with the 
direction in which things are moving.
    Mr. Fall, does the Minnesota Dairy Coalition support 
National Milk's modification to the Price Support Program? Have 
you looked at that?
    Mr. Fall. In all honesty, Senator, the Midwest Dairy 
Coalition probably hasn't come together to discuss the details 
of the Price Support Program, but conceptually, I think with 
discussions that I have had with members of the coalition and 
our lobbyists, I believe that I can say that we are very, very 
interested in National Milk's proposal and the direction that 
they are going. We think it is a step in the right direction.
    We know that the program as it exists currently today needs 
some reform and we believe that this is a step toward going in 
the right direction. We need to maintain some level, some--the 
support program at a $9.90 equivalent is a very, very low 
dollar amount. There is no farm that can sustain themselves at 
that kind of price. We are looking at basically a program that 
functions as a clearinghouse, and by putting the prices on 
commodities that farmers produce, hopefully, it will set a more 
fixed level floor that processors will receive from those 
products.
    Senator Coleman. And Mr. Kozak, you have opted to change 
the Milk Price Support Program into a product-specific support 
program. I grew up in Brooklyn, New York. I have been in 
Minnesota 30-plus years now. When I grew up, I told people 
there was a movie called ``A Tree Grows In Brooklyn.'' I saw 
the movie, I read the book, I didn't see the tree. So it has 
taken me 30 years to try to understand dairy policy, and now we 
are in the process of changing it. Can you just briefly--my 
time is running short here--can you talk about why did you opt 
to change the Milk Price Support Program into product-specific 
support?
    Mr. Kozak. Well, first of all, it sort of better aligns us 
for the future, looking at really what the Price Support 
Program is intended to do. It is a market clearing mechanism. I 
should point out that unlike what I heard from Ms. Tipton, we 
haven't sold product to the government--very little product to 
government in 2 years. There are no stocks of butter and 
cheese. It is truly a safety net. It doesn't distort the 
market, as has been alleged.
    So we looked at, well, is the government buying all milk? 
No, it is not buying fluid milk. It is not buying yogurt. It is 
not buying cheese. It is buying specific products that are tied 
into the basic nature of our dairy industry. So we changed it 
to a specific product price. It incorporates a level that we 
think addresses Mr. Fall's concerns about a safety level of 
$9.90, making sure it is there, at least. In addition, it 
incorporates some other ideas that are more market-oriented, a 
trigger mechanism that when there are huge surpluses, it sends 
the market back.
    It takes the uncertainty out of it. It is more predictable. 
We don't have to worry about a butter powder tilt, discussions 
with USDA about all those issues. It is a contract. It is 
straightforward and I think it is the way to go and it is a 
great transitional mechanism for this farm bill.
    Senator Coleman. I thank you, Mr. Kozak.
    Again, this testimony has been encouraging. The 
conversations that we have had have been encouraging. I want to 
commend the panel. I want to thank the Chairman. I am 
optimistic that we can find some common ground and really do 
some good things in the farm bill for dairy, so thank you, Mr. 
Chairman, and I thank the panel.
    Chairman Harkin. Thank you, Senator Coleman, and I thank 
all of you for your testimony.
    Dairy is always a tough thing to get through. There are so 
many competing different interests, market orders and things 
like that. Perhaps this idea of a blue ribbon panel to take a 
look at this--I am just wondering if some of this ought not to 
be really addressed, whether these old systems that we have had 
for a long time need to be addressed and some changes really 
need to be made. But we have a lot of experts on this panel. We 
have a lot of people to rely upon to give us input on that. I 
continue to ask for all of you, any thoughts, suggestions, or 
input and advice you have as we proceed, please let us know.
    That will conclude our hearing today. We had a long 
session. We have a long session tomorrow. For anyone who is 
interested in coming back, we have another long session 
tomorrow, beginning with just about every commodity group you 
can imagine.
    Thank you very much. The committee will stand adjourned 
until 9:30 a.m. tomorrow.
    [Whereupon, at 1:25 p.m., the committee was adjourned.]
      
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                            A P P E N D I X

                             April 24, 2007



      
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                   DOCUMENTS SUBMITTED FOR THE RECORD

                             April 24, 2007



      
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