[Senate Hearing 110-126]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-126
 
                        PART III: 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 25, 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 III: Challenges and Opportunities Facing American 
  Agricultural Producers.........................................     1

                              ----------                              

                       Wednesday, April 25, 2007
                    STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee 
  on Agriculture, Nutrition, and Forestry........................     1
Chambliss, Hon. Saxby, a U.S. Senator from Georgia...............     2

                                Panel I

Beckmann, Reverend David, Bread For The World, Washington, DC....     8
Buis, Tom, National Farmers Union, Washington, DC................     3
Flory, Bill, American Farmland Trust, Winchester, Idaho..........     7
Stallman, Bob, American Farm Bureau Federation, Columbus, Texas..     5

                                Panel II

Combs, Paul, USA Rice Federation, Kennett, Missouri..............    42
Hoffman, John, American Soybean Association, Waterloo, Iowa......    34
McCauley, Ken, National Corn Growers Association, White Cloud 
  Kansas.........................................................    39
Mitchell, Larry, American Corn Growers Association, Washington, 
  DC.............................................................    38
Pucheu, John, National Cotton Council, Tranquility, California...    36
Tallman, Dusty, National Association of Wheat Growers, Brandon, 
  Colorado.......................................................    41

                               Panel III

Evans, Jim, USA Dry Pea and Lentil Council, Genessee, Idaho......    69
Hayes, Evan, National Barley Growers Association, American Falls, 
  Idaho..........................................................    61
Morris, Armond, Southern Peanut Farmers Federation, Ocilla, 
  Georgia........................................................    64
Murden, Dale, National Sorghum Producers, Monte Alto, Texas......    63
Rundle, Lynn, North American Millers Association, Manhattan, 
  Kansas.........................................................    66
Swanson, John, National Sunflower Association, Mentor, Minnesota.    68
                              ----------                              

                                APPENDIX

Prepared Statements:
    Cochran, Hon. Thad...........................................    78
    Grassley, Hon. Charles E.....................................    81
    Beckmann, David..............................................    83
    Buis, Tom....................................................    89
    Combs, Paul..................................................   101
    Evans, Jim...................................................   115
    Flory, Bill..................................................   124
    Hayes, Evan..................................................   127
    Hoffman, John................................................   129
    McCauley, Ken................................................   134
    Mitchell, Larry..............................................   139
    Morris, Armond...............................................   149
    Murden, Dale.................................................   157
    Pucheu, John.................................................   168
    Rundle, Lynn.................................................   178
    Stallman, Bob................................................   187
    Swanson, John................................................   243
    Tallman, Dusty...............................................   246
Document(s) Submitted for the Record:
American Cotton Shippers Association.............................   258
``Rethinking U.S. Agricultural Policy: Changing Course to Secure 
  Farmer Livelihoods Worldwide''.................................   281
Question and Answer:
Grassley, Hon. Charles E.:
    Written questions for all panelists..........................   348
    Written questions for Bob Stallman and Tom Buis..............   348
Beckmann, David:
    Written response to questions from Hon. Charles E. Grassley..   349
Rundle, Lynn:
    Written response to questions from Hon. Charles E. Grassley..   350
Stallman, Bob:
    Written response to questions from Hon. Charles E. Grassley..   351



                        PART III: CHALLENGES AND



                          OPPORTUNITIES FACING



                    AMERICAN AGRICULTURAL PRODUCERS

                              ----------                              


                       Wednesday, April 25, 2007

                                       U.S. Senate,
                                  Committee on Agriculture,
                                   Nutrition, and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:30 a.m., in 
room SD-106, Dirksen Senate Office Building, Hon. Tom Harkin, 
Chairman of the Committee, presiding.
    Present: Senators Harkin, Conrad, Lincoln, Nelson, Salazar, 
Brown, Casey, Klobuchar, Chambliss, Lugar, Cochran, Roberts, 
Coleman, Crapo, Thune, and Grassley.

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

    Chairman Harkin. Good morning. The Senate Agriculture, 
Nutrition, and Forestry Committee will come to order. This 
morning today we will hear testimony on farm programs and other 
topics from witnesses representing a diverse range of views on 
broader farm bill topics as well as the particular concerns of 
specific commodities and crops.
    Most of us commonly use the term ``farm bill'' when 
referring to the legislation we are considering today. Yet, by 
simply calling it the ``farm bill,'' we understate its far-
reaching consequences for our entire Nation and beyond our 
borders, and we fail to give the full credit due to the vital 
contributions of American agriculture and rural communities.
    This legislation must fulfill a wide range of objectives 
covering agriculture, food, renewable energy, conservation, 
nutrition, trade, the rural economy, and a lot of other 
subjects. All of these needs and demands have to be balanced 
out in the bill that we write.
    A core mission in this legislation, as it long has been, is 
promoting profitability and income potential in agriculture. In 
doing so, we have to recognize that the food and agriculture 
sector is among the most rapidly changing of our economy. There 
are tremendous new challenges, but also unprecedented 
opportunities. With new technology, demographic shifts, the 
rapid expansion of biofuels, and the growth of global markets 
and competition, agriculture is at a crossroads. There is a 
good reason why we write farm bills for a limited period of 
time.
    As we review and rewrite the legislation, we must take the 
opportunity to update our food and agriculture policy so it is 
effective, efficient, and responsive to the needs of the 
rapidly changing agriculture sector.
    On the first panel, we have representatives of the two 
largest general farm organizations and two witnesses who will 
give our Committee additional and somewhat different 
perspectives on farm programs. The remaining two panels include 
witnesses representing wheat, feedgrains, upland cotton, rice, 
oilseeds, peanuts, and pulse crops. These commodities account 
for roughly one-half of the average U.S. farm cash receipts for 
crops. Three of these crops--corn, soybeans, and wheat--are 
grown on about 70 percent of the cultivated cropland in the 
United States. Of course, these crops are very important to the 
U.S. economy, as Federal farm policy has recognized over the 
years. By the same token, given their value and large acreage, 
the policy we write for these commodities has very substantial 
consequences for our Nation.
    When we wrote the Farm Security and Rural Investment Act of 
2002, we had the benefit of a significantly larger budget and 
the flexibility that goes with more money. It is true that 
commodity programs cost significantly less than was estimated 5 
years ago, but under the strange logic of budget scoring rules, 
we do not get credit for that, and the prediction of stronger 
commodity prices reduces our budget for future years. That 
means we will have to scrutinize carefully every proposal as we 
put this farm bill together.
    So I look forward to hearing from today's witnesses. We 
have a tremendous challenge ahead of us to craft a sound farm 
bill that will help improve income, profitability, and new 
opportunities for our Nation's agricultural producers, while 
also meeting the variety of additional needs and objectives the 
legislation must address.
    With that, I will turn to my Ranking Member, Senator 
Chambliss, for his opening statement.

 STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR FROM GEORGIA

    Senator Chambliss. Thank you very much, Mr. Chairman, and 
thank you for holding this hearing today on economic challenges 
and opportunities facing American agricultural producers. This 
hearing will provide agricultural producers and non-producer 
groups an opportunity to provide their views and concerns to 
the members of this Committee during an extremely critical time 
for American agriculture.
    Last year, in our Committee's field hearings, I heard from 
most of the producer groups before us today about their 
experience with the commodity programs in the 2002 farm bill. 
Since that time, these producer groups who deal with farm 
programs on a daily basis have had time to further analyze 
their needs and desires for the 2007 farm bill. Today they will 
provide their specific proposals, and I look forward to their 
testimony that will help guide us in our work to construct a 
farm bill that meets the needs of all of the agriculture 
community.
    We also have before us today a couple of organizations who 
are not the traditional producer groups, and I am sure they 
will provide an interesting theoretical perspective also.
    I want to personally welcome my dear friend and fellow 
Georgian, Armond Morris, who is with us to testify on behalf of 
Southern Peanut Farmers Federation. Armond is a diversified 
family farmer from Irwin Count, Georgia, and currently serves 
as Chairman of the George Peanut Commission. I appreciate him 
joining us.
    Mr. Chairman, I just learned that those of us in the peanut 
family lost a young man yesterday. The son of Don Koehler, who 
is Executive Director of the Georgia Peanut Commission, was 
tragically killed in an automobile accident yesterday, so our 
prayers and our thoughts go out to Don and his family as they 
suffer through this tragedy.
    So, Mr. Chairman, I do thank you for holding this hearing 
and look forward to these witnesses today.
    Chairman Harkin. Thank you very much.
    Now we will turn to our first panel, and we will just go 
down the line this way: Mr. Buis, Mr. Stallman, Mr. Flory, and 
Reverend Beckmann.
    First we will hear from Mr. Tom Buis, the National Farmers 
Union. NFU President Tom Buis has been a top advocate for 
family farms and rural America on Capitol Hill for nearly two 
decades. Before coming to Washington in 1987, Mr. Buis farmed 
in central Indiana and still owns his Indiana farm. Most 
recently, Mr. Buis served as NFU's Vice President of Government 
Relations in the organization's Washington, D.C., office.
    Mr. Buis, welcome to the Committee, and with you, as with 
all of the witnesses, all your statements will be made a part 
of the record in their entirety. Because we have a lot of 
witnesses to hear today, we are going to ask that you sum it up 
in 4 minutes, just the main points you want to make. I will not 
get nervous until we get over 5.
    [Laughter.]
    Chairman Harkin. So welcome and please proceed, Mr. Buis.

 STATEMENT OF TOM BUIS, NATIONAL FARMERS UNION, WASHINGTON, DC

    Mr. Buis. Thank you, Mr. Chairman, members of the 
Committee. If I do not use all my time, I promised Bob Stallman 
I would yield it to him in the interest of unity.
    In my written testimony, I have included the complete farm 
bill principles that were adopted by the NFU delegates, but in 
the interest of time today, I just want to focus on a couple of 
issues, what I see as a couple of exciting opportunities in 
rural America and two recent studies that we have commissioned, 
one on concentration in the marketplace and the other on an 
out-of-the-box, sort of new safety-net concept that I would 
like to outline.
    We conducted numerous farm bill listening sessions around 
the country to gather input from farmers, ranchers, and 
citizens in rural communities, and the level of optimism that I 
witnessed is greater than at any time in my lifetime, primarily 
because of two exciting economic opportunities: one is 
renewable energy--ethanol, biodiesel, wind, cellulosic--and the 
second is consumer-driven demand for fresh, source-verified, 
natural, direct-from-the-farm food. Both of those offer 
exciting opportunities for farmers to get a profit from the 
marketplace, which should be the No. 1 goal of this farm bill.
    One area of big concern is to enact a strong Competition 
Title that helps create, fair, and open competitive markets. 
According to our most recent study done by Drs. Heffernan and 
Hendrickson at the University of Missouri, the concentration 
and the processing and retailing sectors of agriculture 
continue to increase, except for one sector, and that is the 
production of ethanol where the market share of the top four 
firms has declined from 73 percent in 1987 to 31.5 percent 
today; while the production by farmer-owned ethanol facilities 
has increased to 39 percent, making them the largest producers 
of ethanol. And I thank you, Mr. Chairman, and members of the 
Committee for the good public policy that helped drive that 
reversal of fortune, which basically defies those who have 
claimed that concentration is inevitable and it gives 
credibility to those of us who advocate that increased 
competition actually leads to higher prices to farmers and is 
good for rural communities.
    On the commodity safety net, we also commissioned a study--
once it became evident to us that we were going to be dealing 
with significantly diminished resources to write a new farm 
bill, and when this became apparent, we commissioned an 
economic study by Dr. Darryl Ray at the University of Tennessee 
that looked at a purely countercyclical safety net based on 
cost of production. The proposal would provide, according to 
Dr. Ray, the same level of the current safety net in the 
current farm bill, plus save an additional $2 to $3 billion per 
year. I think that is a really important development because we 
are all trying to figure out how we protect farmers in times of 
low prices, because any farm bill, as we know, works in a good 
year, when you have high prices, but it is the low years we 
have to worry about.
    This level of support at 95 percent of the cost of 
production would only provide Federal assistance if commodity 
prices are low and provide no assistance when prices are high. 
Our proposal would eliminate the direct decoupled guaranteed 
payments. The direct payments, as we are finding out, are 
difficult to defend when you have $4-a-bushel corn and are 
often amortized immediately into higher land prices and cash 
rents.
    The savings gained by eliminating the direct payments we 
feel should be used to fund a permanent disaster program. 
Emergency ad hoc disaster assistance is getting more difficult 
to enact, often leaving producers without assistance for 
several years after the weather disaster occurs. Permanent 
disaster assistance is a critical and inseparable part of an 
adequate safety net. Adopting a countercyclical safety net 
based on cost of production also addresses the problems we 
faced the past 2 years with skyrocketing input costs. It is the 
single biggest uncontrollable variable farmers face. A safety 
net based on prices or a direct payment do not address the 
volatility of higher energy prices, which farmers, as price 
takers, cannot pass on to others, as most businesses can and 
do.
    In summary, Mr. Chairman, I would hope you would look at 
both of those studies and our complete testimony. We would be 
glad to work with you and provide additional information about 
both.
    [The prepared statement of Mr. Buis can be found on page 89 
in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Buis. I can 
assure you we are looking at it even as we speak.
    And now we turn to Mr. Bob Stallman, American Farm Bureau 
Federation. Mr. Stallman is a rice and cattle producer from 
Columbus, Texas, serving his fourth term as President of the 
American Farm Bureau Federation. Prior to becoming the American 
Farm Bureau Federation President, Mr. Stallman was President of 
the Texas Farm Bureau, and I am told he is the first President 
to hail from the Lone Star State.
    Bob, welcome again to the Committee. Please proceed.

  STATEMENT OF BOB STALLMAN, AMERICAN FARM BUREAU FEDERATION, 
                        COLUMBUS, TEXAS

    Mr. Stallman. Chairman Harkin, Ranking Member Chambliss, 
and members of the Committee, thank you for the opportunity to 
discuss the economic challenges and opportunities facing 
American agricultural producers today and to present our 
recommendations for the 2007 farm bill which are designed to 
address those challenges.
    The farm bill encompasses much more than just issues that 
affect farmers and ranchers. It covers issues in which all 
Americans have a stake: alleviating hunger and poor nutrition, 
securing our Nation's energy future, conserving our natural 
resources, producing food, fuel, and fiber, and promoting rural 
development.
    Our members have told us that the basic structure in the 
2002 farm bill should not be altered. The current farm bill is 
working and working well overall, not only for farmers and 
ranchers but also for the environment and consumers. The track 
record of success from the current farm program is very good. 
Ag exports continue to set new records, hitting $69 billion in 
2006, accounting for one-fourth of farm cash receipts. 
Government outlays are considerably lower than what Congress 
said it was willing to provide as a farm safety net when the 
2002 bill was signed. Farmers' average debt-to-asset ratio is 
the lowest on record: about 11 percent in 2006, and farmers 
have access to a dependable safety net.
    Following is a summary of the four key principles 
underlying our proposal.
    First, the proposal is fiscally responsible. Even though 
the goals for the farm bill continue to grow, we have 
structured our proposal to stay within the March CBO baseline 
and do not assume any additional budget dollars from reserve 
funds. We accomplish this by proposing offsets for all funding 
increases within a title.
    Second, the basic structure of the 2002 farm bill should 
not be altered. Farm Bureau's proposal for the 2007 farm bill 
maintains the baseline balance between programs. Our proposal 
does not shift funding from title to title.
    Third, the proposal benefits all of the sectors. Farm 
Bureau is a general farm organization, with members who produce 
all commodities. It is easy for any one group to ask Congress 
to allocate more funding for programs that benefit its 
interests, without worrying about whether that will take funds 
away from others. Farm Bureau's proposal seeks balance across 
the board.
    And, fourth, World Trade rulings are considered. The Farm 
Bureau proposal includes changes to comply with our existing 
agreement obligations and World Trade Organization litigation 
rulings, but it does not presuppose the outcome of the Doha 
Round of WTO negotiations, which are far from complete.
    We have nearly 60 recommendations and suggestions included 
in the report we have submitted for the record. I will 
highlight a few of the major proposals.
    One, we support continuation of the three-legged stool 
safety net structure of the Commodity Title, including 
maintaining direct payments and the loan support program. But 
we recommend that the current countercyclical payment program 
should be modified to be a countercyclical revenue program 
using State crop revenue as the trigger rather than the 
national average prices.
    Two, given the determination in the WTO Brazil cotton case, 
we support eliminating the fruit and vegetable planting 
restriction on direct payments. We support continuing the 
restriction for countercyclical payments.
    Three, we maintain our longstanding opposition to any 
further changes in the current farm bill payment limitations or 
means-testing provisions.
    Four, we support establishing a county-based catastrophic 
assistance program focused on the systemic risk in counties 
with sufficient adverse weather to be declared disaster areas. 
In conjunction with this, we support elimination of the 
Catastrophic Crop Insurance Program and the Noninsured 
Assistance Program. The Crop Insurance Program would then need 
to be re-rated to reflect the risk absorbed by the catastrophic 
program.
    Five, we support changing the Dairy Price Support Program 
to support the price of butter, nonfat powder, and cheese 
instead of only the price of milk. We support this only if 
total Federal spending does not increase under this approach.
    Six, we support haying but not grazing on CRP acreage with 
some reduction in the rental rate. Similarly, we support the 
use of selected CRP acres to harvest grasses raised for 
cellulosic feedstock with a reduction in the rental rate. In 
both cases, production practices that minimize environmental 
and wildlife impacts would have to be utilized.
    Seven, we support an additional $250 million annually to 
expand the EQIP program and to allocate 17 percent of all 
mandatory EQIP funding for fruit and vegetable producers. For 
the Nutrition Title, we support funding for additional 
purchases of fruits and vegetables.
    These are just some of the major recommendations. I will be 
glad to answer questions on the other recommendations I have 
not specifically covered. For clarification, any element of the 
current farm bill not directly addressed in our submission has 
our support to be continued.
    In closing, I want to emphasize that our recommendations 
are intended to more effectively use the limited dollars in the 
CBO baseline. There are still many unmet needs across all the 
titles of the farm bill, and our testimony would look somewhat 
different if additional budget funds were allocated for the 
farm bill.
    Thank you.
    [The prepared statement of Mr. Stallman can be found on 
page 187 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Stallman.
    Now we turn to Mr. Bill Flory. Mr. Flory is a fourth-
generation farmer from northern Idaho. He grows three classes 
of wheat, barley, bluegrass, timothy hay, garbanzo beans, and 
timber. In 1994, he was President of the Idaho Grand Producer, 
and in 1998, he was President of the National Wheat Growers. He 
currently sits on the Idaho Soil Conservation Commission and is 
here today to testify on behalf of the American Farmland Trust.
    Mr. Flory, welcome to the Committee and please proceed.

 STATEMENT OF BILL FLORY, AMERICAN FARMLAND TRUST, WINCHESTER, 
                             IDAHO

    Mr. Flory. Mr. Chairman, thank you, Ranking Member 
Chambliss, and Committee members. Good morning. As you said, I 
am Bill Flory, a fourth-generation farmer. Currently I am on 
the Idaho Soil Conservation Commission and am working with 
American Farmland Trust.
    During the past several years, American Farmland Trust has 
conducted an extensive research and outreach campaign with 
hundreds of farmers, ranchers, policy experts, academics, 
environmentalists, nutritionists, and rural activists. What we 
have learned and observed during this process is a dynamic 
picture of agriculture. Mr. Chairman, agriculture has evolved 
dramatically, and the future holds out even greater change. The 
2007 farm bill should, therefore, serve as a bridge for our 
Nation as we evolve and develop our thinking on how we support 
producers, help the environment, and ensure an adequate food, 
fiber, and now fuel supply for the Nation.
    Farm policy has always had an appropriate role in helping 
provide both a safety net of steady, reliable income assistance 
when disaster strikes and tools to manage risk. Unfortunately, 
though, existing commodity programs are narrowly focused on 
supporting prices, not revenues, and, consequently, large 
numbers of producers have fallen through the safety net.
    For example, in situations when yields are low but prices 
are high, the current countercyclical programs do not make 
payments even though they are needed. Thus, in years of drought 
or flood, a farmer may have a significant drop in yields and a 
drop in revenue. However, if prices remain high, a producer's 
drop in revenue might not be covered by the current program. 
This has happened time and time again to wheat, barley--my main 
crops--and sorghum and other producers in the last 5 years.
    The 2007 farm bill is an opportunity to repair this hole in 
the safety net. In order to do so, the safety net should target 
revenue--that is, price times yield--rather than just price, as 
existing programs do. Creating such a system will provide 
greater protection for producers. The Government would provide 
a per acre payment based on projected national revenue, which 
would be forecast every year before planting. Soon after 
harvest, Government payments would be made to farmers based on 
the difference between the actual revenue and the earlier 
projected revenue. Under such a system, the Government covers 
systemic risk due to weather, natural disasters and/or price 
risks during the course of the growing season based on actual 
market conditions. Such a system, therefore, could provide 
protection to producers for disasters, drought, weeks or months 
after harvest rather than waiting for any ad hoc disaster 
program.
    Just as importantly, such a system would be based on market 
prices rather than on Government-set targets and as such would 
eliminate the inequities created by a system that sets target 
prices higher for some than for others.
    Finally, by removing these market-wide or systemic risks, 
you also gain tremendous efficiencies in the crop insurance 
sector, the result of which will be lower taxpayer costs and 
reduced producer premiums on the individual insurance coverage. 
Producers can protect themselves from individual/local risk 
through crop insurance, and the Government will protect against 
global or national risk via a Government payment. This is an 
integration of a national difficult payment program with 
private insurance and is a key factor in the successful 
revenue-based safety net.
    Mr. Chairman, one more thought. Farmers and ranchers 
account for nearly half of all the land in America. These acres 
have a tremendous impact on our Nation's human and natural 
environment. Most farmers are good stewards. No one I know 
wants to leave their land worse off for their children and 
grandchildren than the shape it was in when they were awarded 
it. AFT found strong support for rewarding stewardship, and I 
strongly believe in the concept of a rewards program. I believe 
this concept is alive and well out in the countryside, but the 
Conservation Security Program is in need of significant help 
and nurturing.
    I urge this Committee to recommit itself to finding a 
workable ``green payment'' program as an additional stream of 
income to reward and inspire producers across the landscape for 
their stewardship of our Nation's resources.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Flory can be found on page 
124 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Flory.
    Now we turn to Reverend David Beckmann. The Reverend David 
Beckmann is one of the foremost U.S. advocates for hungry 
people. He has been President of Bread for the World for 15 
years, leading large-scale and successful campaigns to 
strengthen U.S. political commitment to overcoming hunger and 
poverty. Before that, he served at the World Bank for 15 years 
overseeing large projects and driving innovations to make the 
Bank more effective in reducing poverty.
    Reverend Beckmann, please proceed.

  STATEMENT OF REVEREND DAVID BECKMANN, BREAD FOR THE WORLD, 
                         WASHINGTON, DC

    Rev. Beckmann. Thank you very much, Chairman Harkin, 
Ranking Member Chambliss, members of the Committee. Bread for 
the World is a Christian citizens movement against hunger. Our 
members and churches across the country urge Congress to do 
things that are good for hungry and poor people.
    This Committee has done a lot for hungry people. I think 
everybody who is here this morning on the Committee has been a 
hero on one or another Bread for the World issues, so I am 
delighted to be here with you, and I want to say there is a 
deep connection between U.S. agriculture and hunger. So farm 
groups over decades have helped us achieve progress for hungry 
people in our own country and around the world.
    Bread for the World is focusing this year on asking you to 
modify the farm bill in ways that we think would make it better 
for hungry and poor people in our own country and around the 
world.
    In 2002, Bread for the World focused mainly on the 
Nutrition Title and the Food Aid Title. They are clearly 
important to hungry people. And in this farm bill, too, we 
think it is important to strengthen the Food Stamp Program. We 
think that you should both strengthen and reform the food aid 
program.
    But after 2002, we started hearing from church leaders in 
Africa and other parts of the developing world that our farm 
programs were making problems for farm and rural families in 
their countries, very, very poor people. And as we have delved 
more deeply into the farm bill as a whole, we have come to the 
conclusion that it could be changed in ways that would be a lot 
better for rural America, too, especially for rural Americans 
of modest means.
    All of you know that there are a lot of people in rural 
America who are really struggling. Poverty and hunger are more 
widespread in rural America than in urban America. But most 
poor people in rural America are not farmers, so they do not 
get much help from the farm bill. And, of course, people who 
have small farms get less help from the farm bill than people 
who have large farms.
    My cousin in Nebraska, Senator Nelson, has 2,000 acres in 
Seward County. They have received a lot of help from the farm 
programs. But I have other friends in Nebraska, a couple that 
has a small operation. They are struggling to live, and they 
are not getting any help.
    I think you all know the statistics. Most of the help in 
the Commodity Title goes to relatively affluent families. Some 
of it goes to very wealthy families. People get used to any 
system that you create. But this system just does not strike us 
as right, and it seems to us that it gives you an opportunity 
to shift resources in ways that would do a better job for rural 
America, especially for people of modest means.
    The way that the U.S. and the other industrialized 
countries manage our agriculture is also tough on farm and 
rural people in developing countries. Many of them produce 
crops that they cannot sell in the industrialized countries, or 
they are competing against subsidized exports from our country.
    There are poor people in the developing countries who 
benefit from subsidized food, but 70 percent of the 
undernourished people in the world make their living from 
agriculture. So, on balance, the way we are organizing our 
agriculture here now is an obstacle to the progress that is 
underway against hunger and poverty in the world.
    The fact that corn and some other commodity prices are high 
right now gives you an opportunity to make some shifts. There 
are other ways that you can help farmers in this country, 
through rural development, conservation, risk management, 
savings schemes. If you would shift in those directions, you 
can help farmers here and not have these negative effects on 
poor and hungry people around the world.
    I am grateful for all that you are already doing for hungry 
people. I am asking you to make the farm bill even better for 
hungry people in our country and around the world, to make it 
better for rural Americans of modest means, and also to make it 
better for poor and hungry rural people in Africa and the other 
developing parts of the world.
    [The prepared statement of Rev. Beckmann can be found on 
page 83 in the appendix.]
    Chairman Harkin. Reverend Beckmann, thank you very much, 
and I personally want to thank you for so many years of 
speaking truth to power. You always have and I appreciate that. 
And I want to make it clear for the record that I serve as an 
honorary member of the board of Bread for the World, and I am 
very proud of that and very proud of the work that Bread for 
the World does.
    Now we will turn to questioning. We are going to do 5-
minute rounds, and we will try to be strict because we have a 
lot of people here this morning.
    I will just start off with a general question. We have all 
talked about lower spending for commodity programs than was 
anticipated when we passed the farm bill 5 years ago. It is not 
all bad. I have repeatedly heard farmers tell me they want to 
get more income from the market than they do from the 
Government, anyway. I think it is appropriate for the 
Government to help producers withstand the vagaries of weather 
and markets. I am the first to offer a strong, effective safety 
net for ag producers. But I also know we have a tremendous 
capacity to produce agricultural products in this country and 
that producers will not prosper if we eliminate all the risk.
    Now, some of the witnesses referred to the three-legged 
stool of direct payments, countercyclical payments, and 
marketing loan benefits in the current farm program. We also 
provide significant risk management through the Federal Crop 
Insurance Program. So for many producers, we have a pretty 
solid safety net structure, while other producers repeatedly 
need disaster assistance.
    I guess my question is: From your perspective, where do 
Commodity Title programs overlap and duplicate coverage 
available through Federal crop insurance? What gaps leave 
producers most vulnerable to weather and price disruptions?
    I guess to sum up that question even more succinctly: What 
can we move away from and move into that will cost us less 
money but still support a viable safety net for farmers--a 
safety net that is a true safety net, just for low prices, 
weather, that kind of thing? Mr. Buis?
    Mr. Buis. Thank you, Mr. Chairman. I think that moving--
well, first of all, the biggest single gap that I see out there 
is when a producer does not have a crop, and it is primarily 
due to weather-related disasters. So filling that gap is very 
important. Ad hoc assistance does not work much anymore.
    But the second thing is, So how do we do it? Our concept is 
to take the direct money to help fund a permanent disaster 
program and other farm bill priorities, and the reason I say 
that is because, as a corn farmer in Indiana getting $4 a 
bushel for my corn, I should not be getting a direct payment 
while someone in western Kansas or western Nebraska has lost 
their crop and is not getting sufficient resources to continue 
on in the future. I think that is a better use of Federal 
funds.
    Chairman Harkin. Mr. Stallman?
    Mr. Stallman. Mr. Chairman, we tried to address your 
question very directly in our proposal by putting in place a 
county-based catastrophic assistance program. That is----
    Chairman Harkin. Based on revenue.
    Mr. Stallman. No, this is based on disaster losses of more 
than 50 percent in counties that are declared disaster areas. 
This is the disaster portion of our safety net structure. Then 
that allows elimination of the CAT, elimination of the NAP 
program, which our producers say has not worked very well, and 
re-rating of the Crop Insurance Program then to provide cheaper 
buy-up coverage above that. When you----
    Chairman Harkin. Can I just interrupt? It seems that you 
both are for some kind of permanent disaster program. If we 
have a permanent disaster program, what is to prevent farmers 
from just planting knowing that they are going to get a 
disaster payment anyway? We have had that problem in the past. 
You know, we have been around this place a long time. We did 
away with that in 1981.
    Mr. Stallman. Absolutely, and that is a concern of ours, 
and that is why the catastrophic verbiage is in there, because 
that is for losses greater than 50 percent. That is 
catastrophic. And the scenario we have been going through 
trying to seek ad hoc disaster assistance with the political 
and budget hurdles that that entails every year is 
unsustainable, and it is not very predictable. And this 
provides a base level of support to replace the CAT program and 
then buy up coverage above that with a re-rated Crop Insurance 
Program, coupled with the countercyclical revenue-based safety 
net substituting for the countercyclical program.
    Chairman Harkin. Got it.
    Do you have a view on this, Mr. Flory?
    Mr. Flory. Mr. Chairman, we believe that a national-level 
program is a better option for providing the safety net and, 
again, not based just on price but based on revenue.
    We have commissioned an economic study to analyze the cost/
benefits of our program, and we believe that the integration of 
Government systemic coverage and private crop insurance will 
result in a cost savings of over $1 billion annually in the 
amount of Government subsidy we provide for crop insurance 
today.
    Chairman Harkin. OK. Reverend Beckmann, this may be my last 
chance I get to ask a question. Food stamps do a great thing in 
this country, but we find out that people--we instituted food 
stamps to provide food for hungry people, to provide nutrition. 
Now we find out that some of the most obese people in the 
country are those on food stamps, they have the worst diets, 
and they have the highest rates of diabetes.
    What could we do in food stamps to provide more nutritional 
food for people on food stamps?
    Rev. Beckmann. Well, it is an odd thing that in our 
country, the kind of hunger we have in our country often 
contributes to obesity. Virtually all the food stamp families 
are running out of food the last week of the month. We know 
that now because we have EBT and we can see on the computer 
that nearly all the money for food is gone by the end of the 
third week. So those moms do not each much for a week. They 
protect their kids for a few days, then the kids do not eat 
much. Then when the food stamps come in or they get a wage 
check, then they are vulnerable to binge eating. So you eat 
crummy food, there is irregular eating, and this contributes to 
obesity.
    Just making the Food Stamp Program stronger, so that people 
could eat for the whole month, would be a powerful way to 
tackle obesity among low-income people. In addition, we favor 
incentive programs that would give people additional food 
stamps to buy quality food.
    Chairman Harkin. Thank you very much. I went about a minute 
over.
    Senator Chambliss?
    Senator Chambliss. Well, here we were looking for you guys 
to come in here and give us solutions to our problem.
    [Laughter.]
    Senator Chambliss. Mr. Buis, I hear you saying no direct 
payments. Bob, I hear you saying keep them basically the same. 
Mr. Flory, you are saying increase direct payments. So here we 
go.
    Let me start with you, Mr. Stallman. On your flex acres 
issue, we had specialty crop folks in yesterday, and I told 
them what you were going to come in here and say today because 
I had already seen your proposal. And I asked all of them, I 
said, ``What if we eliminate the flex acres provision and we 
replace that with $250 million in funding for conservation 
programs to specialty crop farmers? What is your reaction to 
that?'' And the general conclusion from all of them was that by 
the elimination of the flex acres issue in the farm bill, the 
specialty crop growers would suffer about $3 billion in losses 
of revenue. And, obviously, $250 million would not come near 
replacing that.
    If you have any comment on that, I will give you an 
opportunity to respond to that. Plus, is it your position, Bob, 
that with your proposal on flex acres, that is a green box 
issue now for WTO concerns?
    Mr. Stallman. I will answer the last part of that first, 
Senator Chambliss. Yes, that is our concern, and that is why we 
are proposing the elimination of that. The Brazilian cotton 
case ruling was pretty clear. Although that was not a direct 
part related directly to the cotton, it did set the stage 
basically for those payments to be categorized as amber box as 
opposed to green.
    It does not surprise me that the fruit and vegetable sector 
says that that is not enough. We have had this discussion 
internally with our own fruit and vegetable producers. Our 
attempt was to recognize the level of support that has to be 
given up now, basically, if you forego the direct payments to 
go in fruit and vegetable production, and so that was the basis 
for our calculation.
    There was an ERS study last year, Report No. 30, I think, 
in 2006, that indicated that in the aggregate the shift would 
not--or the change in the provision would not create a $3 
billion level, basically, of angst for the fruit and vegetable 
producers, and it is for a very simple reason. You have to have 
a lot different skill set. You have to have more capital. You 
have to have access to market channels, labor issues. There is 
a whole host of things that right now, if a producer wants to 
shift into fruit and vegetable production on acres that is 
currently receiving payments, it is not--the level of the 
payment is not an impediment for that to happen. And so we do 
not believe the impact would be $3 billion. We do believe there 
would be an impact that would be regional in nature and 
probably crop-specific crops. But in the aggregate, we do not 
believe that the impact would be as great as what has been 
projected by the industry itself.
    Senator Chambliss. Mr. Flory, you raise an issue that is a 
constant issue in every farm bill that I have been involved in, 
this being my third one now, and that is that oftentimes, as 
hard as we try to make sure that payments go to those who need 
it, there is no way that we can ensure that in every part of 
the Commodity Title that only those farmers who are having a 
tough year are going to get a helping hand from the Federal 
Government.
    I am curious about your proposal to provide additional 
direct payments to those farmers like I talk to in Kansas who 
have suffered every year for the last 5 years, and you are 
right, the countercyclical program means nothing to them. They 
do need more in direct payments.
    Do you have some sort of trigger in mind to cause an 
increase in those direct payments, a trigger such as disaster 
of some sort? And if you can elaborate on that a little bit, I 
would appreciate it.
    Mr. Flory. Mr. Chambliss, thank you. First of all, we are 
not advocating larger direct payments. I may have misspoken or 
that may have been misinterpreted. Our proposal is within the 
current budget numbers that are projected, and direct 
payments--we see direct payments as a potential transition tool 
long term. Direct payments we think should be transitioned to 
conservation over time.
    To address your issue of who gets payments when they need 
them and when they do not need them, our national revenue 
proposal allows payments--or provides payments on a systemic as 
well as on an individual base within individual crop insurance 
provides those when needed based on revenue and on price and 
will not distort planting intentions or particular actions of 
farmers that the market is not sending them already.
    Senator Chambliss. I may want to ask you about that again 
later, but I will come back.
    Thank you, Mr. Chairman.
    Chairman Harkin. Thank you, Senator Chambliss.
    Now Senator Conrad.
    Senator Conrad. Thank you, Mr. Chairman. Thank you for this 
really very important hearing, and thank you very much for the 
speed with which you have turned to rewriting the farm bill. I 
think it is critically important that we move as expeditiously 
as possible, and you certainly are leading the way, and I thank 
you for it.
    I would like to ask the witnesses, I have been reading this 
series in the Washington Post about agriculture, and the 
Washington Post has been suggesting that there is widespread 
abuse and that almost all the farm program payments go to 
wealthy people. And while I would be ready to acknowledge there 
are areas that need reform in agriculture, I think most people 
on this Committee would recognize there is a need for reform. 
The basic message that there is no need for support for 
agriculture strikes me as completely off base. I would just 
like to know your reaction.
    Mr. Buis, how would suggest or for what reason is there a 
requirement for support for agriculture in your judgment?
    Mr. Buis. Thank you, Senator. I, too, have been reading 
those stories, and I think it often paints an unfair picture of 
rural America. You know, they compare apples to oranges, and 
who gets the support and at what level. Oftentimes people use 
the 2 million total farmer number and then divide it by the 
payments. And we all know that a great many of those people are 
not real farmers. They do not count on their income. And I 
think you have sort of three classes of farmers: you have the 
very small, sometimes hobby farmers, sometimes for real; you 
have the people in the middle that are doing it full-time for 
their only source of income; and then you have some very 
wealthy farmers and farming operations that are probably more 
than just agriculture.
    Our concern is about that group in the middle, and the 
variability in prices that they cannot control, the variability 
in inputs that they cannot control I think compels us to have 
farm programs to help them out in these tough times. It is a 
matter of national security.
    If you look at what has made this country great, I think it 
is farmers producing ample supply and high-quality food and 
fiber throughout our Nation. That is threatened in the future, 
especially if we do not continue a very rural economy of family 
farmers.
    Senator Conrad. Well, I thank you for that. You know, one 
of the things that struck me about these articles, you do not 
see much reference to the cost of food in this country, the 
lowest cost of food of any country in the history of mankind. 
You do not see much reference to a plentiful and healthy supply 
of food. You do not see much reference to that. You do not see 
much reference to the health of the agricultural sector in this 
country. You do not see much reference to the fact that we are 
a major exporter for this Nation. You do not see much reference 
to that. You do not see much reference to what is the true 
status of most farm families, at least as I know it in my 
State.
    I remember one of their articles indicated that--they were 
talking about farmers who were earning $250,000 to $500,000 a 
year, made it sound as though that was their net. There was no 
reference to that was their gross. There was no reference that 
every input cost came out of that. There was no reference that 
the land cost came out of that. There was no reference to all 
their living costs came out of that. There was no reference to 
the feed cost, the fertilizer cost, the operating cost, that 
all of that came out of that. So it left a very serious 
misimpression about the earnings of family farmers.
    Mr. Stallman, what would you say in answer to the 
Washington Post series of articles?
    Mr. Stallman. Well, Senator, we have been just as disturbed 
as you by those articles. We have actually tried to respond, 
both in seeking editorial boards and also by submitting 
editorial opinions and letters--without a great deal of 
success, I might add.
    It is easy to take selective facts, distort them, and come 
up with a different picture than what reality suggests is the 
case, and that is how we view the Washington Post articles. 
Your fundamental question about why do we still need to 
maintain supports in this country for agriculture is really 
twofold: one is to level out the great variability that exists 
in terms of net farm income due to weather, due to rapid 
changes in input costs, all of the things that were just talked 
about; and the other reason is we are still in a very unlevel 
playing field with respect to the world. That is another issue.
    Senator Conrad. I am just out of time. I would just like to 
rivet that point. The fact is our European friends provide 5 
times as much support to their producers as we provide to ours, 
and they outdo us on export subsidy 87 to 1. So if people want 
to abandon our people to a total unlevel playing field, they 
will have to take the consequences.
    I thank the Chairman.
    Chairman Harkin. Thank you very much, Senator Conrad, and I 
just want to for the record thank you for your comments on the 
expeditious moving of the farm bill. But we would not be 
halfway as far as we are now were it not for the foresight of 
Senator Chambliss in chairing this Committee last year and 
having the hearings around the country and establishing the 
record. So I just want to make it clear that we have worked 
together on this, and I thank Senator Chambliss for moving the 
ball forward beginning last year.
    Now we will recognize Senator Roberts.
    Senator Roberts. I left, but I came back.
    [Laughter.]
    Senator Roberts. But I would be delighted to yield to the 
distinguished former Chairman.
    Chairman Harkin. Senator Lugar then.
    Senator Lugar. I thank the distinguished Chairman, and I 
thank the current Chairman and the past Chairman for a great 
deal of the statesmanship that has brought us to this point.
    I am trying to explore this year in drafting legislation 
that tries to take a look at all farmers and everything they 
produce on the farm. It is not a new concept, but before this 
Committee we have heard people talk about whole farm income. 
And I think that is very important.
    We had testimony from the fruit and vegetable people who 
are disadvantaged currently or for others who are not among the 
five major crops, and the fact is that each one of us who are 
farmers obtain income in many ways from the farm. My hope would 
be we could think through a safety net for maintenance of farm 
income so that, regardless of whether you had livestock or 
fruits and vegetables or an orchard or whatever, you were 
considered a farmer and had at least the benefit of the same 
sorts of supports of trying to maintain income and maintain 
your farm.
    There could be debate, and there would be, as to what level 
of safety net provides that and whether it ought to be based 
upon 5 years of experience or 3 years of experience, there 
being ups and downs in the process. But at least I would like 
consideration this year of something that is not crop specific, 
that does not have the vested interests of particular groups of 
people who come to us with one crop in mind or one section of 
the country from time to time. And to couple this with farmer 
savings accounts, once again not a totally new idea, but one 
that is increasingly among many farm groups and those 
interested in nutrition programs offer opportunities for 
farmers to put away some money in the event they have a 
reasonably good year under favorable circumstances in that 
savings account, as a rainy-day fund for the days that are not 
so good.
    Now, once we get into this type of a proposition, obviously 
it is so markedly different from our current system that any 
change of this magnitude creates many questions, and we are 
trying to study these before putting pen to paper finally and 
producing a bill, which we plan to do in the days ahead, so 
there can be honest debates on the language itself for Title I.
    My initial estimates are that this will have great savings, 
and, therefore, the debate then in the Committee will be on our 
objectives in conservation, our objectives in further nutrition 
support for people throughout the country, on a number of 
objectives that usually are covered by the farm bill, but by 
necessity cannot be covered quite so generously.
    At the end of the day, my guess is that we will probably 
still have savings of money which would be applauded by 
taxpayers who are not farmers or who are not advocates before 
us today, but at the same time, that is not my total objective. 
It is, rather, equity for farmers generally as well as for the 
American people in terms of nutrition.
    Now, this is not on paper and, therefore, it is unfair to 
ask each of you for any comment you might have about that 
general thrust. But, nevertheless, I will ask you anyway, and, 
Tom Buis, would you give us a judgment for a moment?
    Mr. Buis. Well, you know, I think it is an interesting 
concept, Senator, that we would be glad to take a look at. I 
think given the budget climate and the other challenges we 
face, we need to look at a lot of options on what really 
accomplishes the goal of the farm bill and the farm programs.
    Senator Lugar. Bob Stallman, do you have a comment?
    Mr. Stallman. With respect to farm savings accounts, we 
have supported that concept for a lot of years. We have always 
been just short of getting something implemented there.
    Our delegates have not explored whole farm revenue 
recently. I remember in the mid-1990's, as we were moving to 
the 1996 farm bill, we looked at some of those proposals. And, 
rightly or wrongly, a lot--and this is just sort of anecdotal. 
A lot of our members were concerned about the level of private 
information that would have to be provided to document 
basically whole farm revenue and payments under such a program, 
i.e., tax returns and something like that. And they had a great 
concern about that, so I do not know if that can be resolved, 
but that was one of the concerns back then.
    Senator Lugar. Mr. Flory?
    Mr. Flory. Mr. Lugar, yes, we see the CSP and conservation 
type programs, the concept of rewarding stewardship, as being 
alive and well in one method. It also transcends all 
commodities. It is not commodity specific, and it should not be 
regional specific. And some thoughts on this would be: one, it 
needs to be funded; two, it needs to be--simple forms need to 
apply--as I sit on a State Conservation Commission, forms need 
to apply federally as well as across State lines, one 
application, allocation of time, people, and money, efforts 
more efficient. And it should not be--you know, conservation 
should not become an entitlement. There should be a strong 
oversight and requirement for reasonable and measurable 
benefits from it. Conservation could provide that solution, 
Senator.
    Senator Lugar. Reverend Beckmann?
    Rev. Beckmann. What you are talking about sounds like 
almost precisely the sort of farm bill that Bread for the World 
would like to see. We will have to see it, but we would 
campaign to get those kinds of reforms enacted by Congress. 
Bread for the World is working with a working group that 
includes the Conference of Catholic Bishops, the Lutheran 
Church the Methodist Church, the Presbyterian Church, 
Evangelical Churches and Jewish groups. Each of them have their 
own decision making process, but I am pretty sure that the 
religious community would be really thrilled by this kind of 
reform.
    Senator Conrad is right that some of the abuses in the 
current system are giving farmers a bad name. It does not make 
any sense. Reform along these lines, it seems to me, would 
revivify broad American support for strong support for farmers.
    Senator Lugar. Thank you.
    Chairman Harkin. Thank you, Senator Lugar.
    Now Senator Roberts.
    Senator Roberts. Yes, thank you, Mr. Chairman and Mr. 
Chambliss, for calling this hearing today and providing the 
leadership as we move forward in the preparation of the always 
difficult task, like pushing a rope, of writing a new farm 
bill.
    Senator Conrad, thank you for your remarks.
    Is there anybody here on the Committee or anybody in the 
audience that does not recognize the fact that we have to have 
champions for production agriculture? I am talking about the 
people who actually produce the food and fiber for this country 
and the world, and that is not somebody that is a hobby farmer. 
People keep talking about a small family farmer versus a big 
farmer. That reminds me of the story of the 5-foot-3 farmer 
from Vermont who is a part-time farmer reading Gentleman's 
Quarterly on his swing porch with his orchard, as opposed to 
the fellow that is 6-foot-2 that belongs in the Farm Bureau, 
out in my part of the country who farms 10,000 acres, but 
somehow or other the Washington Post cannot get that--just 
cannot get that.
    I am happy that you said the remarks that you did, Senator 
Conrad, and I support you all the way, because I think these 
folks are taken for granted.
    I am happy to see we have two Kansans on the witness list 
today: on the second panel, Ken McCauley from White Cloud, 
Kansas, and President of the National Corner Growers 
Association; on the third panel representing the North American 
Millers Association is Lynn Rundle from Manhattan Kansas, home 
of the ever optimistic and fighting Wildcats.
    [Laughter.]
    Senator Roberts. John Thaemert is the President of our 
National Wheat Growers and Jerry McReynolds is the Secretary-
Treasurer of that organization, so as you can see, Mr. 
Chairman, Kansas continues to play leading roles in our 
Nation's farm policy debate.
    Well, after suffering from years of drought and 
subsequently low yields, this year Kansas producers finally--
finally--will see optimal growing conditions with significant 
moisture. However, just before we got really excited about it, 
we had an April freeze, and it really blanketed our State and 
others, and it jeopardized the crop, shifting the mood from 
optimism to concern.
    Our producers also faced the challenges of ever expanding 
Government intervention and regulations, increasing production 
costs, large holes in the safety net, just to name a few. In 
fact, there has been no safety net in the Great Plains, on the 
High Plains, where we do produce a lot of the crops that we 
need to feed this country.
    In my time as a congressional staffer, a Congressman, and a 
Senator, I have worked on no less than seven major farm bills 
leading into this debate. Each one was unique, and this round 
is certainly no exception. I agree that new policy ideas are 
essential to the long-term success of agriculture. I am aware 
of all the work that has been done on the programs being based 
on revenue instead of price. I encourage that. I understand 
that. I especially want to thank Senator Lugar for mentioning 
farm savings accounts. We had that as a promise way back in 
1996 when the Farm Bureau and the wheat growers and everybody 
else endorsed it. That is really a Finance Committee 
jurisdiction, and I know that Senator Conrad and I are going to 
work hard on that.
    But I do not think it is in the best interest of 
agriculture to take from one title of the farm bill at the 
expense of another, and I worry that some may want to travel 
down that road this year. Mr. Chairman, as you know, I voted 
against the current farm bill. At the time, I warned our wheat 
producers that had the bill been in place since 1982 previous 
to the passage of the farm bill, no countercyclical payments 
would have been made in 9 of those 17 years. Those were some of 
the toughest years that we had. That is why we offered the 
Cochran-Roberts substitute.
    Unfortunately, that trend worsened over the life of this 
farm bill, bringing the number to 14 out of 22 years. Since the 
bill's passage, our wheat producers have received no 
countercyclical payments, little benefit from the Loan 
Deficiency Program. That is not right. That is discrimination. 
That is two-thirds of the years that a farm bill has been in 
place that the Great Plains really have not received any 
assistance. That is just not right, and we should not let that 
happen again.
    At the same time, while severe weather decimated yields, we 
reduced supply and thus increased the price of wheat well 
beyond the target price. Additionally, when producers have no 
crop to harvest, there is no use for an LDP program.
    Now, during these difficult times, our wheat producers had 
only two programs they could rely on. One was direct payments, 
and the other was crop insurance. Bob Kerrey, Dick Lugar, and I 
did not work for 18 months to improve the Crop Insurance 
Program so we could get 95 percent participation way out there 
in western Kansas, eastern Colorado, all throughout the Great 
Plains, to have the Crop Insurance Program in addition become a 
target for revenue for other programs. And if you do not want 
disaster payments, the best answer is a good Crop Insurance 
Program. And, by the way, when you lose a crop, then your crop 
history goes down, and you are in a world of trouble in that 
regard as well.
    Access to foreign markets is also very critical, as has 
been said by our witnesses, to our farmers and ranchers. You 
cannot write a farm bill for the EU or Brazil or Canada or 
potential agreements in the WTO, but we should be aware of our 
global commitments. In this regard, the direct payments are our 
least trade-distorting program in the Commodity Title. Since 
direct payments have been the only program in the Commodity 
Title that provide any safety net to the majority of producers 
in my home State, I do get concerned when I read that some want 
to cut funding to direct payments and reduce assistance for 
crop insurance. I will try very hard not to let that happen.
    Efforts to minimize cut, trim, or reduce these programs 
will not sit well in farm country, certainly not with this 
member, and that should be the case from Texas to North Dakota 
and the Great Plains as well. And I urge members who are 
representing those States to certainly take notice.
    Were it not for direct payments and crop insurance the last 
4 or 5 years, many Kansas producers would be out of business 
altogether. Just ask their bankers. Too many are not.
    Kansas does produce more wheat and sorghum than any other 
State. Both of these crops have indicated their No. 1 priority 
in this farm bill is to protect the direct payments. That being 
said, I think my decision is very clear.
    I look forward to working with my colleagues and producers 
in the fields to write a realistic and reasonable and 
predictable bill. I thank the witnesses for their attention and 
for coming and for their advice and their expertise and their 
leadership for production agriculture.
    Thank you very much, Mr. Chairman, Chairman Chambliss.
    Senator Chambliss. [Presiding.] What would you like to do 
with direct payments?
    [Laughter.]
    Senator Roberts. I think we ought to stick them where they 
are needed, sir.
    [Laughter.]
    Senator Chambliss. Thank you, Senator Roberts.
    Senator Salazar?
    Senator Salazar. Thank you very much, Senator Chambliss, 
and I also want to thank Chairman Harkin for the great work 
that he has done in this effort, picking up from where Chairman 
Chambliss had taken off last year.
    Let me just at the outset, as we move into these important 
titles of the farm bill, I want to echo what Senator Conrad 
said, that I think that Washington and the Washington Post and 
lots of our urban brethren and sisters are disconnected to what 
is happening in rural America.
    When Senator Pat Roberts travels through Kansas, when I 
travel through the eastern plains and I see communities like 
Otis and Pritchett and a number of other communities that 
essentially are withering on the vine, I see an America out 
there that has been forgotten, and, frankly, in many ways it 
has been both--not only a Republican administration has done 
that, in my view, in the last 6 years, but even before that a 
Democratic administration, that we have not yet found the right 
policies and initiatives to make sure that rural America is 
having an opportunity to survive the way that urban America 
survives. My own State of Colorado was one of the fastest-
growing States in the Nation in the 1990's, yet in my view 
there were about 12 counties of the entire State, along the I-
25 corridor, that benefited from that growth, and the rest of 
the State, which is mostly agriculturally dependent, was 
declining both in terms of population and economic vitality.
    And so I think what we are doing here in this farm bill in 
trying to chart a course for agriculture as a national farm 
policy is very important in how we revitalize rural America. I 
very much look forward to working with both my Democratic and 
Republican colleagues to come up with the best farm bill 
possible.
    I want to ask a question about energy to both you, Mr. 
Buis, and Mr. Stallman. You say that as we look forward to the 
future that things are exciting out there in farm country. And 
I have seen a lot of that happen throughout my State as we 
embrace this clean energy future, which I think is going to 
bring an unprecedented 21st century opportunity for rural 
America.
    Mr. Stallman, I noticed in your testimony, provided by an 
organization that has many members in my State, that you are 
OK, it seems, leaving the Energy Title of the farm bill with 
respect to the kind of funding that it got in 2002. I do not, 
frankly, know that that is going to be enough if we really are 
going to be part of this biofuels revolution that is going to 
help agriculture.
    So my question to both of you is: What is it that we can do 
to make sure that when we get into Title IX of the farm bill, 
we are doing the most to take advantage of that vision that you 
described, Mr. Buis? Mr. Stallman, why don't I start with you, 
and then Mr. Buis.
    Mr. Stallman. Well, we certainly support the renewable 
energy dynamic that we are in now. There is no question about 
that. One of the issues we discussed internally was----
    Senator Salazar. Let me push you a little bit. You support 
the energy dynamic. It is easy to talk about this thing in 
terms of rhetoric, but when we look at the fiscal constraints 
that we are in, there is only so much money for the farm bill. 
The position of your organization is we ought not to put any 
more money into the Energy Title of the farm bill. Is that 
correct?
    Mr. Stallman. That is not our position in total. With 
respect to the CBO baseline and the restrictions we are under 
now, we are saying we should not shift from other titles in the 
farm bill into energy. Part of the issue is that many of the 
support elements that are in place for renewable energies are 
outside the jurisdiction of the Ag Committee. There could 
always be more dollars, I suppose, put in grants for things to 
promote cellulosic feedstock and those kinds of things, and our 
proposal did actually address that to some extent with using 
CRP ground for cellulosic feedstock production. But once again, 
with limited dollars, we had to make a decision about, how 
those should be allocated, and we made the decision that there 
should not be shifting between the titles given the limited 
dollars in the CBO baseline.
    Senator Salazar. Mr. Buis?
    Mr. Buis. I think we should be very aggressive. Without a 
doubt, this is the single most exciting thing that has come 
along in my lifetime in agriculture, and there is a lot of 
enthusiasm, not just about ethanol but biodiesel and cellulosic 
and wind energy.
    I think there are a couple of things you could do. One is 
step up the research and development. You know, ethanol just 
did not occur last year. It has been a 30-year effort, and it 
took a lot of hard work to get to where they were in a position 
to capitalize on higher energy prices. It took a lot of work to 
increase the efficiencies.
    When we called it ``gasohol'' back in the 1970's, it was 
not energy efficient, it was not economically efficient. And, 
in fact, our real expertise probably came from people that made 
alcohol in their backyards. It was not very sophisticated. But 
people had a vision, and it took a while to get there, and I 
think the Federal resources that can be directed to help----
    Senator Salazar. Would you support shifting some of the 
money from the other titles into Title IX for energy? Or do you 
have a different----
    Mr. Buis. I think I would. I think that safety net concept 
that we laid out today provides $3 billion in savings out of 
the Commodity Title and still provides the same level of 
protection. That could be used for not only a permanent 
disaster program to take care of those people that do not have 
a crop, but it could also be used for energy priorities or 
conservation priorities, Senator.
    Senator Salazar. Thank you very much. I look forward to 
working with you on these issues, the Commodity Title, the 
permanent disaster insurance, and lots of other things that we 
obviously have a discussion underway. I just would say one 
final thing in conclusion. When Senator Conrad made his 
statement about, I think, the insensitivity of the Washington 
Post, I often wonder what would have happened if in 2007 this 
Congress was even considering the creation of an Agriculture 
Committee. Given that we have so many people who frankly do not 
understand the importance of agriculture, especially, I think, 
in the other chamber, I do not know that we would have an 
Agriculture Committee today. So I am glad, Chairman Harkin, 
that you and the rest of the members of this Committee continue 
the tradition of being advocates for that part of America that 
needs a lot of advocates.
    Thank you.
    Chairman Harkin. [Presiding.] Thank you very much, Senator 
Salazar.
    Now we turn to Senator Nelson.
    Senator Nelson. Thank you, Mr. Chairman, and thank you, 
gentlemen on the panel. I appreciate very much the comments.
    You know, the question that we really have as we look at a 
farm bill is to focus on what we really are pursuing here. I 
think we are pursuing food, fuel, and, yes, Senator Chambliss, 
fiber, and as long as we are going with the ``F'' words, feed 
for the livestock industry, because that is what we are really 
about here. I would like to have us think about the farm bill 
for 2007 as the Food and Fuel Security Act, recognizing that it 
is also about fiber and feed.
    In that regard, you are right, Tom. When you go back to the 
1970's and 1980's, even in 1991 when I was elected Governor of 
Nebraska--or 1990, taking over in 1991, we had one ethanol 
plant that produced 30 million gallons of ethanol. When I left, 
we had seven. I do not want to take full credit. I just want 
the record to reflect it happened during my watch. Now we are 
looking at 14 or 15 plants. We are looking at $4 corn, and we 
recognize that this is the most exciting thing that we can 
recall. And I think we are at the beginning of it, not at the 
end of it. But what we have to also put in perspective is how 
we move from a corn-based product to a multi-cellulosic-based 
product.
    In that regard, we import ethanol right now, and there is a 
tariff on it, as there should be; otherwise, we would undermine 
our fledgling ethanol industry here in the United States. I 
have a bill--I hope you will take a look at it, S. 426, called 
the ``Biofuels Investment Trust Fund Act''--that will take the 
money from the tariff on ethanol, put it into this trust fund, 
maybe $30 million--we are not sure exactly what it is, but it 
is a fairly significant amount of money for specialized 
research, finding the ways to convert other cellulosic material 
into an ethanol product or other biofuels product, because we 
are not really facing the chicken or the egg. We have to have 
both. We have to have the technology as well as the source of 
that cellulosic material.
    I wonder, Tom, if you have any thoughts about how we might 
go about making sure we are doing both.
    Mr. Buis. Well, I think your legislation sounds like a 
great start because if we do not do both, then we are probably 
just going to get to a ceiling on production. In the case of 
ethanol right now, with all the expansion that has occurred, if 
we just count on splash blending ethanol at the current level, 
we are soon going to be overproducing. So for those people who 
do not like high corn prices, you might wait a while because we 
are about to catch up with the market, what the market can 
endure.
    So we have to keep going, and removing those hurdles toward 
a higher level of ethanol, putting that research money and 
finding money--and, you know, it is not a question of do we 
have the money. It is do we have the priorities. You know, $5, 
$6 billion is a small amount to invest in our Nation's energy 
security.
    Senator Nelson. For our energy security, absolutely. We 
grow our crops to grow our fuel these days. I also agree with 
you on a permanent fund for disasters in a farm bill. There is 
one thing about the budgeting here that has really bothered me 
is we do not have the equivalent of a rainy-day fund like we 
had in Nebraska. We taxed the people. We paid for the kinds of 
benefits and programs they needed. We put some in the rainy-day 
fund. We gave the rest back in tax cuts. We had a rainy-day 
fund. We do not have a rainy-day fund or a drought fund, which 
is probably a better description of what we are looking for.
    So I think that we can do that, and actuarially, with the 
exception of Katrina and a major disaster like that, we can 
look and see what our disasters are every year, and I agree 
that can take a look at what the disaster payment can be and 
then ensure a catastrophe above that level. We also have to 
find a way to deal with multi-year disasters in a single 
location because the Crop Insurance Program will not do that. 
As you mentioned, the base will shrink. It will shrink down to 
zero with about 8 years of drought as we have had in certain 
parts of Nebraska.
    So we have got to find a way to be able to overcome that. 
But it needs to be about production agriculture, it needs to be 
about the future. I appreciate your comments very much, and I 
know that the Chairman is going to work as hard on 2007 as he 
did on the 2002, and we will come up with a product that I 
think will serve the American agriculture and our needs very 
well.
    Thank you very much, Mr. Chairman.
    Chairman Harkin. Thank you, Senator Nelson.
    Now Senator Lincoln.
    Senator Lincoln. Thank you, Mr. Chairman, and thank you so 
much for the series of hearings that you are having here, and 
certainly your incredible leadership on this farm bill and in 
2002.
    We have had great leadership from Senator Harkin and 
Senator Chambliss, and I think we have so many things here to 
be excited about. We talk about energy, we talk about 
opportunities ahead of us for this great Nation. And so I look 
forward to working with you to produce something that I think 
will be very, very productive for our entire Nation.
    We thank our panel for being here. I, too, would like to 
echo the concerns that Senator Conrad, the Chairman of our 
Budget Committee, brought forward today in terms of really 
misrepresenting many facts in a way that distorts some of the 
incredible jobs that are done by farm families all across this 
country. Whether they are big or small, as Senator Roberts 
pointed out, they work hard every day.
    I come from a seventh-generation Arkansas farm family, and, 
Mr. Buis, you mentioned the in-between, that middle farmer. And 
yet when I look at farmers in my State--I visited with one 
recently--and I look at my own family where my mother now, who 
is a widow, is able to rent her land, and that was the 
investment she and Dad made, was in their land, in their farm 
and in their land, with the idea that that would be their 
retirement.
    And I look at one of our larger farmers, which I visited 
with the other day, who had six tenants. He had to be a large 
farm in order to be able to survive growing the crops that he 
grows. But he also provides, as he rents from three widowed 
women and two absent landowners who want to keep their farms 
and believe very strongly in their heritage.
    So sometimes often big and small get intermixed or 
misrepresented in many ways for those of us in different 
regions of the Nation, and I think that is so important to keep 
in perspective.
    One of the things that Senator Conrad--he mentioned 
abundance, he mentioned affordability, he mentioned our ability 
to do a lot of things, and in doing so I think really 
reinforced to all of us that Government's involvement in 
providing a safety net for agricultural production in this 
country is a blessing. And it is also an investment--an 
investment that we should never underestimate. And I have a 
problem when people really come and say what a waste of money 
when we are looking at half of 1 percent of the overall budget, 
to see an investment in not only abundant and affordable food, 
but safe.
    Safety was one of the issues that I think that we may have 
missed or he may have surpassed in his listing. A lot of people 
have talked about the Washington Post. You just have to go to 
that same publication today to recognize what is happening 
globally in terms of safety of food and where food is coming 
from. And if we put our producers out of business in this 
country, we are going to become dependent on a food source 
across the globe that is not so safe.
    I think today's article about China and the safety of the 
food supply that has come there, we have looked at what is 
coming in pet foods, and we are recognizing that those could 
also be in human food products as well.
    We know that some of our trading partners have been 
particularly poor in meeting international standards, and we 
subject only a small fraction of the food that comes into this 
country to very, very close inspection. So I just hope that we 
will also keep in mind our ability to produce a safe food 
supply as well. I think that is important.
    Mr. Buis, I understand that the NFU would support the 
elimination of direct payments to allow for the changes in the 
countercyclical payment that you have mentioned, but also to 
fund that permanent disaster program that you talk about.
    Is your organization's support for the reduction or the 
elimination of those direct payments contingent on the 
Committee's ability to follow through on those priorities? It 
seems as if what I was hearing you say with Senator Nelson was 
that whether or not you would support moving those fundings 
away from the Commodity Titles toward other titles in the farm 
bill as well.
    Mr. Buis. Well, I think what I was saying is the score that 
we had in the economic analysis provides about $3 billion extra 
money after you pay for the 95-percent cost of production, 
countercyclical safety net. Those ought to be used for other 
priorities. I do feel, however, that----
    Senator Lincoln. You do not prioritize where you send 
that----
    Mr. Buis. I do.
    Senator Lincoln. Oh, OK.
    Mr. Buis. Permanent disaster assistance has to be included. 
And, again, I think the direct payments, one of the strong 
supports for the direct payments is when a producer does not 
have a crop, but they at least have something. But putting it 
out there in a shotgun approach where people who do not need it 
are getting it, it looks like if we redirected part of those 
funds into people who actually suffer losses so we can avoid 
those Washington Post stories about the dairy cows down in 
Texas or Louisiana where the Space Shuttle debris fell and they 
got a payment, and have a permanent disaster program that is 
really based on providing the assistance to those who suffered 
the loss, I think that is a fair, common-sense approach to all 
of this.
    Senator Lincoln. Well, we appreciate your insight and 
certainly the work you have done there in looking at where that 
$3 billion might go. It goes quickly. We can certainly tell you 
that. We appreciate it.
    Mr. Buis. But at least I am offering some extra money back.
    Senator Lincoln. Thank you.
    Chairman Harkin. Thank you, Senator Lincoln.
    Senator Brown?
    [No response.]
    Chairman Harkin. He is not here right now. Senator Cochran?
    [No response.]
    Chairman Harkin. Senator Crapo?
    Senator Crapo. Thank you very much, Mr. Chairman, and I, 
too, want to join with those who thanked you for holding these 
hearings and the aggressive schedule you have set for us to 
move forward in developing our next farm bill.
    I wanted to take an opportunity in my first chance here to 
speak to point out that we have three Idahoans here to 
participate in our hearing today. We have Mr. Bill Flory, who 
has already testified, from the American Farmland Trust. We 
also have Mr. Evan Hayes from the National Barley Growers 
Association, and Mr. Jim Evans from the USA Dry Peas, Lentils, 
and Chickpeas Association. So we think you have made very wise 
choices in the witnesses you have selected to provide advice 
here today.
    I join with those who have raised concerns about the 
misperception that seems to be so broad as represented by the 
discussion today about the Washington Post. It truly is 
unfortunate, as we try to develop policy for the food and fiber 
of our country, that we have to deal with such significant 
levels of misperception and misinformation. So, again, that is 
another reason I appreciate your giving us a chance to hold 
these hearings.
    I want to use my time today with Mr. Flory. Mr. Flory, 
again, welcome to the Committee. I had a question with regard 
to your proposal that we move to a revenue-based system with 
regard to our disaster assistance. Can you explain to me if the 
approach that you have discussed were adopted, what kind of 
budget implications would it have for the farm bill as we are 
now operating?
    Mr. Flory. Thank you, Senator. Like I indicated before, we 
have had Dr. Zuloff take a look at this and analyze the cost/
benefits, and we believe the integration of crop insurance on a 
national systemic level as well as on an individual producer 
level will result in cost savings of over $1 billion annually 
to the Government in the subsidy of crop insurance. Part of 
that will happen because of less risk to the private crop 
insurance industry. When there is a large change in price based 
on international events or a large change in yield based on 
international events, that would be covered on a national 
program, and the balance would be picked up--the local risk, 
whether it is hail insurance, a drought, some local event, then 
would be covered by the individual's own purchase of private 
crop insurance.
    Senator Crapo. All right. Thank you very much. I would like 
to explore that a little further, but since I just have a 
couple minutes left, I want to move to one other issue very 
quickly; and that is your discussion of being good stewards of 
the land and your experience with the Conservation Security 
Program. As you know, that program has been well received in 
Idaho by those who have been able to participate in it in the 
watersheds that have been able to be covered. And yet some of 
the other producers who were concerned about the lack of 
availability of CSP in their areas feel that it puts them in a 
competitive disadvantage with those even in their own 
watersheds or in neighboring watersheds.
    I am just curious as to how we could work to improve and 
fine-tune this program to make it less complicated and more 
accessible. Do you think that changes to the program are 
needed? And if so, what would you suggest?
    Mr. Flory. Senator, yes, I do think there are some great 
opportunities in conservation, CSP being one of them. And as a 
Tier III CSP holder, you know, I can address the environmental 
benefits that it has, when on my farm, in a fully direct seeded 
situation for over 6 years, when there is a 50-year storm, that 
there is 4 inches of rain in less than 5 hours on my freshly 
seeded fields, there are no rills, there is no sheep, my 
freshly seeded crop remained intact, and that was 2 years ago.
    That certainly is in the public benefit, and I am quite 
proud of that, and I think as an industry, we are all stewards 
of the land and chief environmentalists of our own immediate 
and long-term future. But CSP is underfunded. It is a great 
concept. I will look anybody in the eye and suggest that my 
stewardship in a Tier III contract is important to me short and 
long term and important to the public.
    But when it comes to funding it, we think that, 
intermediate-wise, anyway, direct payments can be and should be 
considered to be converted toward conservation. Direct payments 
right now are very specific, commodity specific; conservation 
is not. There is a great opportunity there. Even though I am 
primarily a wheat and barley producer, those are program crops. 
I still support the concept of conservation across all 
watersheds, all crops, you know, and across the U.S.
    This also provides subtle but very effective risk 
management, too, but conservation should not become an 
entitlement where you just walk in, sign the papers, and wait. 
NRCS, as chief technician, and hopefully FSA, as administrator 
of this, I can envision a great opportunity there that our 
detractors, those who question funds coming to production 
agriculture, our detractors would sit quietly and say well 
done, you know, environmental benefit, you know, locally, 
nationally, and we do not mind infusing money over the long 
term into production agriculture for those results.
    Senator Crapo. Thank you, Mr. Flory. I see my time has 
expired, but we can pursue this further together.
    Thank you.
    Chairman Harkin. Thank you, Senator Crapo.
    Senator Casey?
    Senator Casey. Mr. Chairman, thank you very much for this 
hearing and for the speed with which you are moving the farm 
bill, and we appreciate all the work you have put into it, as 
well as this Committee.
    I come from Pennsylvania, and a lot of what we are talking 
about here does not have a direct impact necessarily on our 
State on a large scale. So we are not a major grain-producing 
State, but we are a major grain-using State for our dairy farms 
and hog farms and other livestock operations. So the decisions 
that we make with regard to this farm bill in terms of 
commodity payments or supports are, in fact, in the long run 
important to the people of Pennsylvania, and especially those 
in need of reliable stock and supply of affordable feed for 
their livestock.
    So I think we have got a lot of work to do, and I know that 
if there is one thing that brings all of us together, it is 
that we have got to take a very close look at the 
recommendations made by all the organizations as we make 
determinations about the farm bill.
    But, first of all, Mr. Buis, I wanted to direct my first 
question to you, and I wanted to read from your testimony. I 
was struck by this statement and also heartened by it, the 
first page of your testimony, and I guess I cite this in the 
context of Pennsylvania and our dairy farmers, it being our 
largest agricultural sector, over 8,500 dairy farms, but that 
number is ever shrinking. And they affect the real lives of 
some real families across our State, the basic problem being, 
as you know, and many people in this audience know today, the 
differential that they suffer from the cost of production 
versus the price they can obtain.
    But I was struck on the first page in a list of bullet 
points that you say, ``We support a new farm bill that includes 
the following provisions,'' and you have got about 10 or 12 
listed on this one page, but you said, and I quote, 
``supporting dairy programs that include a strong safety net 
and a supply management system to protect producers from a 
market collapse,'' and also, ``dairy prices should reflect cost 
of production shifts for producers.''
    I just wanted to have you elaborate on that and provide 
some perspective on this challenge that I know families in our 
State face, but I think it is a national problem as well.
    Mr. Buis. Sure, and I totally agree with you, and so do all 
of our delegates, on the importance of dairy and the tremendous 
changes going on in the dairy industry, and the challenges they 
face are probably greater than any other sector at this time: 
rising input costs, lower-than-normal milk and cheese costs. 
And how we move forward, you know, the 20 years I have been in 
Washington, we always seem to get sort of regionalized in dairy 
policy, and divided, and we do not end up moving forward, and a 
lot of things get shoehorned into dairy policy, and it makes it 
very complicated and the end of the day does not work very well 
for dairy producers.
    I think we need to take a big look at what is going on, 
both with the market orders and the safety net, and dairy 
producers deserve a safety net just as much as the corn or 
wheat or soybean farmers do. And we feel very strongly about 
that.
    Senator Casey. Well, I appreciate that, and I appreciate 
you including that in your testimony.
    I have limited time, and I promised Senator Klobuchar I 
would stay on time, so I want to be cognizant of my time. But, 
Mr. Stallman, I wanted to direct my second question to you with 
regard to the specialty crop block grant program. We, of 
course, had a panel yesterday that had, I think, a difference 
of opinion with you on this, and I do as well. But let me just 
ask you something very specific, and I want to sure I am 
characterizing your position on this correctly, that your 
stated reason for ending this program is that State governments 
are using the block grants to offset budget shortfalls. Is that 
an accurate summation of your testimony with regard to this 
question?
    Mr. Stallman. In some States, we believe that is exactly 
what happened, that the funds basically were not used to 
benefit the producers, and that is our biggest concern with the 
block grant program. That probably is not true for all States 
because I have had reports that a couple of States did a good 
job of taking care of their producers.
    Senator Casey. And is there any way that you--and I would 
ask you to do this and ask the indulgence of the Committee, of 
our Chairman, to get this information, a list of the States 
where you can identify that problem?
    Mr. Stallman. We can go through and provide some additional 
information that is more State-specific, yes, sir.
    Senator Casey. That would help, I think, to amplify the 
record.
    What do you think are some of the ways--and I know I am 
actually over time now. If you can just very succinctly tell us 
ways to fix that problem.
    Mr. Stallman. Well, I think you have to put some 
restrictions and rules in place, which kind of undermines the 
initial theory about putting the funds out there and let the 
States use them however they wish. You are going to have to 
figure out a way to target it better directly to fruit and 
vegetable producers if that continues.
    Senator Casey. Thank you. I am out of time.
    Chairman Harkin. Thank you, Senator Casey.
    Senator Coleman?
    Senator Coleman. Thank you, Mr. Chairman.
    Mr. Chairman, let me start by thanking you for your 
leadership. You are working us hard. We had a long hearing 
yesterday and one today.
    One of the fascinating things about this issue is it really 
does afford the opportunity to work in a bipartisan way. Our 
battle I think is with those who wonder why we should have a 
farm bill in the first place, and I associate myself with the 
words of our Budget Chairman, my colleague from North Dakota, 
and my colleague from Arkansas, too, about safety. We have the 
safest, most affordable food supply in the world. We need to 
keep it that way. I would be remiss now--everyone is 
recognizing their folks from their State. We had our Minnesota 
dairy folks here yesterday, and we have got for sunflowers, 
John Swanson here today. We are all in this together, and I 
think that is a good thing.
    I want to focus on one issue, and I am going to actually 
turn to Mr. Stallman and Mr. Buis and talk about energy. Saying 
that we are in this together is obviously to work in a 
bipartisan way. I did not hear much difference as I listened to 
Mr. Buis and Mr. Stallman. I take it, Mr. Stallman, you are for 
all the advancement, innovation, and everything that Mr. Buis 
wants. But what you are saying is if we are stuck with the CBO 
baseline, let's not steal it from direct nutrition payments, 
let's not steal it from commodities. The fact is that in the 
energy bill we can do some things with energy, but we are not 
going to be dealing with disaster assistance, that there are 
some other opportunities, and I think that is why we have to 
look beyond this Committee. I think it is important beyond this 
Committee to look at some of the things going on in the energy 
bill to accomplish what we are both talking about.
    The one area of concern, as we have seen this great avenue 
of sense of opportunity and hope, with the importance of 
getting rid of our dependence on foreign oil, stopping the 
addiction that we have that fuels thugs and tyrants like 
Ahmadinejad and Chavez. And we see it in our farm fields. In 
Minnesota, we pride ourselves on being the Saudi Arabia of 
wind. It used to be a boutique energy resource. Not anymore. We 
are doing about 500 million gallons of ethanol a year. I think 
we are projected to reach 1 billion by 2008.
    But here is the concern I have, and in the time I have, I 
will turn to Mr. Stallman and Mr. Buis. Wall Street is coming 
in. I am all for bringing investment. I am all for getting 
capital out there and generating more capacity. Obviously, we 
have got to deal with distribution, which is a big issue. But 
there is this question about the profits coming back to those 
in the community. There is no question that there is a greater 
return on investment if it is spent in the local area, if it is 
distributed in the local area.
    So the question is: How do we continue to encourage 
investment, national investment, and at the same time make sure 
that we are doing some things to ensure that money is kept in 
the local community? And I would invite your input into this 
beyond this hearing, but I would be interested in the time we 
have, Mr. Buis and Mr. Stallman, if you have some suggestions 
about how we do that.
    Mr. Buis. Well, I think it is the biggest concern in rural 
America about renewable energy, is how do we keep control of 
this hot new economic opportunity. One thing that we have had 
and kicked around is targeting the Federal programs that 
encourage production, including tax breaks to locally owned or 
farmer-owned entities, or controlled. You could still have 
investment coming in, but the control stays in the local 
community. And, you know, that has really been the biggest 
surprise of ethanol production and biodiesel, is what it has 
done to those rural communities. The only place is in rural 
America where you are seeing the boards come off the storefront 
instead of going up, and you are seeing the spin-off economic 
activity. And I would say it is because they are locally owned 
and the profits stay in that community and get reinvested in 
that community. And we should do everything we can to make sure 
that we do not lose that opportunity.
    Senator Coleman. Thank you.
    Mr. Stallman?
    Mr. Stallman. Well, in an ideal world, farmers coming 
together to add value to their products through whatever 
business structure they like and producing ethanol and 
biodiesel, that is ideal. And targeting grants, targeting some 
startup funds, those kind of things, as Tom has indicated, are 
ways of doing that. But obviously you cannot stop--at least I 
do not think we want to stop capital flows because those 
capital flows are still important to creating production of a 
product that adds additional demand at the producer level. So, 
ideally, whatever we can do in terms of cooperative business 
structures for farmers and targeting some startup costs will 
help that, although some farmers are now talking about cashing 
out and selling to those same investors. So it is a choice that 
they have to make one way or the other.
    Senator Coleman. I would like, again, continued input as we 
continue this discussion.
    My time is up. Thank you, Mr. Chairman.
    Chairman Harkin. Thank you very much. We have a 15-minute 
vote that just started right now, so I will be glad to run over 
and vote and come back. Senator Klobuchar is next, if you would 
like to go ahead and continue to question. And then when the 
second bells ring, then if you will just recess the Committee--
I hope to be back by that time. So Senator Klobuchar.
    Senator Klobuchar. [Presiding.] I would be glad to take the 
gavel, Senator Harkin. Thank you for your leadership, Mr. 
Chair.
    [Laughter.]
    Senator Klobuchar. Thank you, all of you, and I just wanted 
to mention, first of all, like Senator Coleman, I am from 
Minnesota, and, Mr. Buis, one of the Farmers Union alums, 
national alums, Dave Frederickson, who is a former national 
Chair, national president, is my ag guy. He came out of 
Minnesota. Hilary is the one here, and he came out of 
retirement to join our staff and is having fun learning the 
BlackBerry and e-mail, so you can report that back, and is 
doing a very good job.
    Like a lot of the other Senators, I just wanted to put out 
there the fact that I just came back from a tour in the Red 
River Valley, and our farmers are fans of the 2002 farm bill. 
They want to keep that safety net in place. They know that we 
saved $23 billion and we came in under projection, and we think 
it is very important. I have heard this from Farm Bureau people 
as well, Mr. Stallman, how important it is to keep that safety 
net as well as look at permanent disaster relief and have a 
strong Energy Title.
    Like Senator Casey, we have a lot of dairy farmers, and we 
would like to continue the milk and sugar programs.
    I wanted to follow up on some of the questions about 
energy, and I noticed, Mr. Buis, that you were talking in your 
testimony, your written testimony, about the work that the 
National Farmers Union is doing with carbon trading, where you 
basically are serving as a middleman or an aggregator to get 
farmers in the Chicago Climate Exchange. I am also on the 
Environment and Public Works Committee and have met with those 
folks.
    Could you talk a little bit about that? And what are the 
obstacles you see to farmers enrolling in that?
    Mr. Buis. Absolutely. I think the biggest obstacle is one 
of education and getting people informed that the farming 
practices that they adopt that they can get compensated for 
helping capture carbon out of the air.
    You know, I see farmers as playing a key role in helping 
clean up our environment, not just providing food and feed and 
fiber and fuel, but we also have this tremendous opportunity to 
help our Nation with the environmental program.
    The Carbon Credit Program has worked extremely well. In the 
first few months that we were up and running last year, we 
signed up 1.1 million acres into the program. They have 
expanded it now to a greater number of States. It was 
originally only in 14 Midwestern States. They are going further 
west. They have got rangeland programs, grassland, and I think 
you heard testimony yesterday from some folks at the University 
of Minnesota that one of the best carbon-capturing commodities 
is actually prairie grass, and that can be grown all over the 
world.
    Senator Klobuchar. Thank you for mentioning that. With many 
other members on this Committee, we are pursuing how we can 
move toward the next step in ethanol, building on our 
successful corn ethanol as well as the biodiesel work that we 
are doing.
    Mr. Stallman, I noticed in your testimony, your written 
testimony, you talked about the need to look at power 
generation using manure, and when I was visiting one of our 
dairy farmers who is interested in this, who operates, 
actually, a methane digester, he had the line, ``It is only 
waste if you waste it.'' I thought you might want to use that. 
But could you comment more about some of the work that we can 
do to encourage farmers to produce electricity from this 
renewable resource?
    Mr. Stallman. Well, two main areas. One is continued 
research to make those processes more economic, and the other 
is grants to help producers put in place those kinds of 
production systems. Those are fundamentally the two areas. And 
I guess a third point would be information about what the 
potential and opportunities are to maybe a lot of producers who 
have not really thought about it a whole lot yet.
    Senator Klobuchar. Just to change the topic a little, Mr. 
Buis, I notice you mentioned country-of-origin labeling and the 
frustration with the fact that this was supposed to be 
implemented. I always say that we should be talking more not 
``Where is the beef?'' but ``Where is the beef from?'' Could 
you elaborate a little more on how you think this would help 
American farmers if we got this into place and, you know, any 
ideas you have for us to get it moving?
    Mr. Buis. Well, I think it is imperative that we finally 
get the law that was passed in 2002 implemented. You know, the 
only reason it is not is those people that have a vested 
interest in bringing in less expensive and often lower quality 
products make a ton of money off of it. From a producer's 
standpoint, we are proud of what we produce in the United 
States and proud to put our name on it. And we will compete 
with anyone, anytime, anyplace, but let's identify that 
product.
    For those who want to continue to delay and delay and 
delay, I just think it is hurting our competitiveness. We now 
import 20 percent of the food that is consumed in the United 
States. Most Americans do not know that. Most Americans poll 
after poll would choose American food and American food 
products. It is not only an economic issue, but I think a 
public safety issue as well.
    Senator Klobuchar. Well, thank you. As you can see, I 
better go vote so the Committee stands in recess to reconvene 
after the conclusion of the vote, which will most likely be 10 
to 15 minutes. I guess I will use this for my gavel.
    [Laughter.]
    Senator Klobuchar. Thank you.
    [Recess.]
    Chairman Harkin. [Presiding.] The Committee will resume its 
hearing, and I thank John Thune for being--boy, that must have 
been a real spring.
    Senator Thune. I was just trying to keep up with you, Mr. 
Chairman.
    Chairman Harkin. I recognize Senator Thune.
    Senator Thune. Thank you, Mr. Chairman, and I appreciate 
your efforts in putting together a good, strong record as we 
prepare to write a farm bill, and I credit you for inviting all 
the groups that have been in in the past several weeks and 
yesterday and today. Obviously, the backbone of U.S. farm 
policy has been and will continue to be an effective and 
reliable Commodity Title. I was involved with that process as a 
member of the House Ag Committee back during the 2002 farm 
bill, and since that time, I think the current Commodity Title 
has been providing fundamental economic support for U.S. 
commodity crop producers, while encouraging sustainable crop 
production. And it has benefited, I think, agriculture in a 
couple of ways: one, through the direct and countercyclical 
payments, and then through the loan deficiency payments and CCC 
marketing loans. And, combined, I think those two programs have 
successfully served their purpose by providing a dependable 
revenue stream and market-based financial support during 
marketing periods with low commodity prices.
    The one thing in spite of those accomplishments, though, 
that I think is important to point out is that the 2002 farm 
bill did not eliminate the need or demand for ad hoc disaster 
assistance. And over the life of the 2002 farm bill, Congress 
has authorized approximately $8 billion for nationwide 
emergency agricultural disaster assistance, not including 
hurricane-related spending.
    So it seems to me, at least, that as part of the 2007 farm 
bill, it would be really important to try and come up with a 
way that we can eliminate the need for some of these ad hoc 
disaster programs once and for all. We had for too many years 
farmers and ranchers who had suffered losses due to natural 
disasters and wondered whether they were going to receive the 
assistance they needed to survive financially until the next 
year. And this year is a good example. We are still trying to 
pass disaster assistance for crop production year 2005, and a 
couple of years later.
    So it at lot of times unfortunately around here ends up 
becoming a political football, and so my hope would be that as 
we formulate the 2007 farm bill that we could come up with some 
sort of a Disaster Title that authorized timely, comprehensive 
assistance whenever losses occur as a result of natural 
disasters.
    I have got a couple of questions, and I know you are trying 
to keep this thing moving along, Mr. Chairman, and you have a 
lot of panels, but having to do, a couple things, one, with an 
Energy Title, and I would like to direct this question, if I 
might, to Mr. Buis. But the question has to do with should a 
program, an energy dedicated crop program use acreage enrolled 
in existing conservation easement programs, or should energy 
crops be grown on acreage enrolled in a new and separate 
program such as an Energy Reserve Program?
    Mr. Buis. Thank you, Senator. I think that is a really good 
question. It has been debated a lot within our organization, 
but the feeling is that if we allow energy production on the 
CRP acreage, that is going to basically compete with the crops 
that are going into energy production out of the private 
sector. And one of the real benefits of this program is finally 
farmers are getting a price from the marketplace, which is 
where everyone wants to get it. Bringing in additional 
Government-supported acres just to provide subsidized energy 
feedstock for big power companies or big ethanol manufacturers 
does not make a lot of sense from the farmers' perspective.
    It is OK to run some pilot projects, and I know as we move 
into some cellulosic energy with switchgrass and stuff, maybe 
we can experiment with some on a limited basis. But we should 
not look at that as approximately 40 million acres of increased 
feedstock just to depress the prices in the private sector.
    Senator Thune. Mr. Stallman, in your testimony you detailed 
a farm bill proposal for a permanent disaster program, which I 
just referenced earlier, and when coupled with re-rated crop 
insurance, how much is this program expected to cost the 
taxpayer? And do you believe that that type of a program would 
once and for all eliminate the need for ad hoc disaster 
payments?
    Mr. Stallman. Well, we have structured our proposal for the 
Catastrophic Assistance Plan to capture the dollars from the 
elimination of the CAT program and the NAP program, and 
basically fund the program that way. And then because that 
takes the lower level of risk away from the current Crop 
Insurance Program, you re-rate crop insurance and, thus, have 
the opportunity for the same premium for producers to buy up at 
a higher coverage level than what they can now.
    So our proposal basically is to do it within the confines 
of the current farm bill and with dollars coming out of the 
current CAT and NAP program.
    Senator Thune. Is that a better proposal or a better 
solution than simply modifying the existing Crop Insurance 
Program to adequately provide for disaster loss assistance?
    Mr. Stallman. We think it probably is. I think we have 63 
different recommendations as to how to improve crop insurance, 
and it has become very difficult to tinker with the program, if 
you will. So we think this is a fundamental shift in providing 
that catastrophic disaster assistance. But coupled with a re-
rated program and coupled with a countercyclical revenue-based 
safety net, we believe within the dollars that we have to work 
with, it provides an overall better safety net than what we 
have now.
    Senator Thune. Just a general question that you can answer 
quickly, because my time is already gone. But is a permanent 
comprehensive disaster program authorized under the Disaster 
Title needed in the 2007 farm bill?
    Mr. Buis. Yes.
    Senator Thune. And given the budgetary constraints that we 
are going to be working with--and that is the problem I visited 
with the Chairman about, because I think we need to do this. 
But we have got some interesting budgetary constraints that we 
are dealing with this time around.
    Mr. Stallman. Our goal is that as long as it is within the 
budget that we have to work with, yes, we should have a 
standing Catastrophic Assistance Program. If we have to start 
capturing monies from other areas of the farm bill, then we 
would not be supportive of that.
    Senator Thune. Mr. Buis?
    Mr. Buis. Yes, we do support it, and the farm bill safety 
net concept that we have roughly saves $3 billion, and about 
half of that we would anticipate needs to go into a permanent 
disaster program.
    Senator Thune. Mr. Chairman, thank you. I appreciate your 
answers.
    Chairman Harkin. Thank you, Senator Thune.
    I want to thank this panel for your excellent testimony and 
for your patience, and we will dismiss this panel.
    We will call up our second panel at this time: Mr. John 
Hoffman, Mr. John Pucheu, Mr. Larry Mitchell, Mr. Ken McCauley, 
Mr. Dusty Tallman, and Mr. Paul Combs.
    We want to welcome the second panel. Again, thank you for 
your patience. We still have one more panel to go yet today, 
and we will get to them as soon as we get through this panel.
    As I said with the first panel, your statements will be 
made a part of the record in their entirety. I am going to ask 
4 minutes, correcting my time there, 4 minutes. If you could 
just sum up the major point that you want to get across to us 
so that we can have more time for questions and answers, I 
would appreciate that, and we will work down the same way.
    We will start with Mr. John Hoffman, American Soybean 
Association. Mr. Hoffman is a soybean farmer from Waterloo, 
Iowa and First Vice President of the American Soybean 
Association. A member of the Iowa Soybean Association since 
1989, Mr. Hoffman farms about 600 acres of soybeans annually on 
his corn and soybean farm.
    Mr. Hoffman, welcome again to the Committee. Welcome back, 
and please proceed.

   STATEMENT OF JOHN HOFFMAN, AMERICAN SOYBEAN ASSOCIATION, 
                         WATERLOO, IOWA

    Mr. Hoffman. Well, good morning, Mr. Chairman and other 
members of the Committee. I am John Hoffman, a soybean farmer 
from Waterloo, Iowa, and First Vice President of the American 
Soybean Association.
    My Dad is 80 years old today, Senator, and I grew up and 
the rule of thumb was you should start planting corn if the 
ground is fit on the 25th of April. So I want to thank you for 
scheduling this hearing when the ground was not fit on the 
25th. It rained.
    Chairman Harkin. I guess it is raining in Iowa today. I 
called back and they said it was raining pretty hard.
    Mr. Hoffman. Yes. But I certainly do appreciate the 
opportunity to present the ASA views on economic opportunities 
and challenges facing U.S. soybean producers and how they might 
be addressed in the 2007 farm bill.
    Mr. Chairman, one of the biggest opportunities facing U.S. 
agriculture is the uncertainty about commodity prices and 
production caused by increased volatility in energy markets. 
While farm prices today are high by historical standards, they 
could drop suddenly if world petroleum production were to rise 
and prices fall. Additionally, we should not underestimate the 
ability of producers worldwide to increase production in 
response to higher energy prices, thereby causing prices to 
fall. In this environment, it is critical for our producers to 
have an adequate safety net to protect farm income.
    U.S. soybean farmers support the basic structure of the 
2002 farm bill, with some minor adjustments. We believe the 
``three-legged stool'' that includes the marketing loan, the 
countercyclical program, and direct payments, combined with 
crop insurance and disaster assistance, can provide an adequate 
safety net for farmers in years of low prices and reduced 
production.
    I say ``can'' because the 2002 farm bill established target 
prices and marketing loan rates at levels that did not provide 
an adequate safety net for producers of oilseed crops. The 
soybean target price of $5.80 per bushel triggers 
countercyclical payments only when season average soybean 
prices fall below $5.36 a bushel. Prices have not fallen below 
$5.36 during the past 4 years under the current farm bill. And 
even if they had, the countercyclical payments are made on only 
85 percent of the production formula that uses outdated payment 
yields established in the early 1980's. This safety net is too 
low to be meaningful to soybean producers.
    Our proposal for the Commodities Title of the 2007 farm 
bill would adjust target prices for all program crops to a 
minimum of 130 percent of the Olympic average of season average 
prices in 2000 through 2004. At 130 percent, the soybean target 
price would be increased from $5.80 to $6.85 a bushel. 
Subtracting the 44-cent direct payment, the effective target 
price would therefore be $6.41. Considering the target prices 
for other commodity crops, we consider this to be an adequate 
and reasonable level of income support for soybean producers.
    Our proposal would also adjust marketing loan rates to a 
minimum of 95 percent of the same 5-year Olympic price average. 
These adjustments would only marginally affect soybeans. 
However, some current loan rates do not reflect recent market 
price relationships between crops, and they need to be 
adjusted.
    Mr. Chairman, attached to my written statement is a table 
showing current and our proposed marketing loan rates and 
target prices for all program crops. Also attached are tables 
showing the cost of these adjustments for individual 
commodities, and a table showing the overall cost for all 
target price and loan rate adjustments of about $900 million 
year.
    We understand the Committee has limited resources to 
accommodate these or any other proposed changes in the current 
Commodity Title. We strongly support funding these adjustments 
in farm support levels through the reserve account for the 2007 
farm bill, expected to be included in the fiscal year 2008 
budget resolution. However, to the extent new funding is not 
available, we encourage you to consider making these 
adjustments using resources from within the Commodities Title.
    A second economic opportunity facing U.S. soybean farmers 
is the development of a domestic biodiesel industry. Biodiesel 
is a key new market for U.S. soybean oil, which has 
historically been in surplus, resulting in lower soybean 
prices. Efforts to establish biodiesel as a viable renewable 
fuel received a major boost when Congress enacted the biodiesel 
tax incentive in the JOBS bill and extended the incentive in 
the Energy Act of 2005. We strongly encourage extension of that 
incentive by the 110th Congress.
    While domestic biodiesel production has expanded in 
response to the tax incentive, so too has the likelihood of 
significant biodiesel imports. Unlike ethanol, biodiesel 
imports do not face an offsetting tariff equal to the tax 
incentive. Moreover, foreign biodiesel is often produced and 
exported through the benefit of Government subsidies. These 
imports can enter the U.S. at less than the cost of 
domestically produced biodiesel, endangering the growth.
    Finally, ASA supports authorizing the funding of the 
permanent disaster program assistance 2007 farm bill. We also 
strongly support increased MAP and Foreign Market Development.
    Thank you for the opportunity this morning.
    [The prepared statement of Mr. Hoffman can be found on page 
129 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Hoffman.
    Now we turn to Mr. John Pucheu, National Cotton Council. As 
Chairman of the National Cotton Council, Mr. Pucheu and his 
brother own and operate a diversified farming operation in 
Tranquility, California. Wouldn't you like to live in 
Tranquility?
    [Laughter.]
    Chairman Harkin. It is in the San Joaquin Valley. Welcome, 
Mr. Pucheu, and please proceed.

STATEMENT OF JOHN PUCHEU, NATIONAL COTTON COUNCIL, TRANQUILITY, 
                           CALIFORNIA

    Mr. Pucheu. Thank you, Mr. Chairman, for holding this 
hearing today. My name is John Pucheu, and I serve as Chairman 
of the National Cotton Council.
    The cotton industry believes farm legislation that 
preserves the structure of the current law is critical to our 
ability to meet current and future challenges. Our program 
recommendations meet the primary challenges facing the cotton 
industry: preserving what remains of our domestic customer base 
while adjusting to meet the challenge of growing export 
markets. An effective cotton program should contain a marketing 
assistance loan available without limitation and an accurate 
world price discovery mechanism, a direct payment feature to 
provide predictability for growers and lenders, a 
countercyclical feature that provides assistance in times of 
low prices, and planting flexibility. We oppose reductions in 
payment limitations, changes in eligibility requirements, and 
modification in the existing adjusted gross income test. 
Existing limits are punitive and inequitable for efficient 
producers of high-value crops.
    We also support continuation of the extra-long staple 
cotton program. We will recommend adjustments to the 
administration of the marketing assistance loan to reflect 
changing market conditions.
    Last year, we worked with USDA to implement significant 
changes to improve the flow to markets. An industry working 
group is developing proposals to further enhance the flow to 
market wile preserving an effective safety net.
    We support inclusion of a provision in the new farm bill to 
assist our struggling domestic textile industry. Even though 
U.S. consumers are buying more cotton products at retail, raw 
cotton consumption by U.S. mills has decline 50 percent due to 
a flood of subsidized imports. Like the renewable fuels 
industry, downstream users of cotton need assistance to 
preserve a viable production base. We are recommending a low-
cost program for domestic mills that will be paid for by 
modifications to the cotton program.
    Our position on payment limits may be controversial, but 
limits expressed in fixed dollar amounts adversely affect our 
most productive operators and are highly inequitable. Because 
they are applied on a cumulative basis to all crops, limits 
disrupt sound marketing decisions and cause cropping decisions 
based on program benefits rather than market signals.
    Cotton farmers are not waiting for others to solve their 
problems. They have invested in a highly successful, self-
financed market development program and a user-funded classing 
system which serves as a model for the world. U.S. producers 
continually adopt new technologies to maintain competitiveness 
and quality and to employ sustainable production practices.
    China is our most important market, but her purchases of 
U.S. cotton are down 62 percent compared to last year. China 
rations access to its fiber markets to protect its domestic 
cotton producers and manmade-fiber manufacturers. China must 
provide a more predictable access to its markets in return for 
being the beneficiary of access to the robust U.S. consumer 
market. China and India must be more active participants in the 
ongoing WTO negotiations.
    Cotton farmers are deeply concerned by efforts in the WTO 
Doha negotiations to isolate cotton and squeeze unfair and 
inequitable concessions from the U.S. The U.S. should not make 
additional concessions on domestic support until our market 
access objectives are met and exceeded. The U.S. should not 
make further inequitable concessions on cotton. We sincerely 
appreciate the recent letter to USTR that reinforced these 
views and that was signed by 58 Senators.
    U.S. exports of cotton have fallen short of expectations 
this year. The termination of step two hurt U.S. 
competitiveness, and subsidies and trade restrictions by other 
countries are harming our exports, and export commitments to 
China are low.
    U.S. cotton remains in the loan primarily because of 
China's limitations on access to their market, yet U.S. markets 
are open to Chinese textile products. We are concerned by the 
Department's imposition of additional financial penalties on 
farmers should they forfeit their loan if demand does not 
rebound. Imposing new penalties on producers in mid-season is 
not a solution. We are working to develop positive steps to 
make U.S. cotton competitive.
    Mr. Chairman, the cotton industry is a critical component 
of the U.S. economy, especially in the 17 States where it is 
produced and its products are manufactured. We look forward to 
working with you and your colleagues to ensure that it remains 
viable.
    Thank you for the opportunity to testify today.
    [The prepared statement of Mr. Pucheu can be found on page 
168 in the appendix.]
    Chairman Harkin. Thank you, Mr. Pucheu.
    Now we turn to Mr. Larry Mitchell. As CEO of the American 
Corn Growers Association from--what State are you from, Larry?
    Mr. Mitchell. I used to farm between two little towns in 
Texas called Dallas and Fort Worth.
    Chairman Harkin. Oh, I see. A couple of small burgs down 
there. Welcome back to the Committee, Mr. Mitchell.

STATEMENT OF LARRY MITCHELL, AMERICAN CORN GROWERS ASSOCIATION, 
                         WASHINGTON, DC

    Mr. Mitchell. Thank you, Chairman, and I appreciate you 
holding this meeting today, and on behalf of ACGA and our 
President, Keith Bolin, who is hoping to plant his corn crop 
soon, we bring our suggestions for Title I today of the farm 
bill. Our suggestions come from the Food from Family Farm Act, 
which is also supported and been worked on by the National 
Family Farm Coalition and is signed off on by over 60 
organizations to this point. I will cut to the chase and tell 
you what we are looking for in Title I.
    We are looking to re-establish a floor price for 
commodities from the marketplace using the nonrecourse loan 
program and setting those loan rates as close as possible to 
the cost of production for those commodities. We are looking 
for the re-establishment of a reserve program or a system of 
reserves--reserves for national security, reserves for national 
energy security, as well as international famine relief. And we 
are also looking at a way of dealing with overproduction when 
those problems do exist. Of course, right now we are looking 
at--everything is pretty close to what we need. We are raising 
about what we are using on corn, but this is a fairly recent 
phenomenon.
    One of the ways we would like to see a movement toward 
dealing with overproduction is to give farmers an incentive to 
plant dedicated energy crops on acres that they are currently 
planting crops in excess, a program that has been introduced, I 
know, but Ms. Klobuchar and Mr. Peterson on the other side of 
the Hill to establish an energy reserve, separate and apart 
from the CRP, to give those producers an opportunity and an 
incentive to plant some of those other crops. We look at this 
somewhat like we looked at soybeans over the last four decades 
where four decades or so ago we did not really raise too many 
soybeans. Today what are we raising? Seventy million acres or 
more on a pretty constant basis. You know, it was not even a 
program crop until 1996.
    We are looking at a portfolio of dedicated energy crops to 
help us over the next four decades, such as soybeans have in 
the past, because I cannot imagine what the price of corn, 
wheat, and cotton would have been over the last decade if we 
were not planting any soybeans.
    We feel that these provisions would best serve farmers, 
consumers, taxpayers, the environment, and our rural 
communities. It may not be the best farm bill for integrate 
livestock factory farms. It may not be the best one for our 
food processors who are currently reaping record profits. And 
it may not be the best program for international grain traders. 
But we represent farmers, and we represent our rural 
communities, and we feel that we have got the best plan at hand 
to deal with the budget situation that this Committee finds 
itself in, because I think we can save a significant amount of 
money if our farmers were to get their price from the 
marketplace as opposed to getting that price from taxpayer 
subsidies.
    We have also looked at some of the problems that this might 
present for the WTO, and I think if we were to take this plan 
to the WTO as a serious proposal, I think we might be surprised 
at who would support it, because we have already got some 
feelers out there, and it looks pretty good.
    I think there are those in this country that are less 
afraid that they would not accept it and more afraid that they 
would accept this sort of a program.
    One other point, as my 240 seconds are beginning to wane 
here, I would ask you and others on this Committee to consider 
a legislative initiative such as that proposed on the other 
side of the Hill by Ms. Herseth to halt the closing of our 
county FSA offices. Until we get this farm bill written and 
find out what is going to be in this farm bill, it seems a bit 
shortsighted to be closing FSA offices right now before we have 
even gotten this farm bill written to find out how it is going 
to be implemented.
    One thing we do know is that every farm bill that we write 
gets more and more and more complicated, and I do not suspect 
this farm bill is going to be any better in that line.
    Thank you, sir.
    [The prepared statement of Mr. Mitchell can be found on 
page 139 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Mitchell, and, 
again, in looking over your testimony last night, I liked the 
ten questions you put in your written statement.
    Mr. Mitchell. We got a pretty good response from that. We 
thought it was similar to what Secretary Johanns had asked, 
just a little different set of questions to bring forward.
    Chairman Harkin. They are pretty interesting.
    Now we turn to Mr. Ken McCauley, President of the National 
Corn Growers Association. He is from White Cloud, Kansas, where 
he farms corn and soybeans with his wife and son.
    Mr. McCauley, welcome to the Committee.

 STATEMENT OF KEN McCAULEY, NATIONAL CORN GROWERS ASSOCIATION, 
                       WHITE CLOUD KANSAS

    Mr. McCauley. Thank you, Mr. Chairman, members of the 
Committee, Senator Roberts. On behalf of the National Corn 
Growers Association, I appreciate this opportunity to present 
our views of U.S. ag policy and the challenges that lie ahead 
for our industry.
    My name is Ken McCauley. I am President of National Corn 
Growers Association, and I am from White Cloud, Kansas, as you 
said, where I farm with my wife and son.
    The National Corn Growers Association represents more than 
32,000 dues-paying corn growers from 48 States. We also 
represent more than 300,000 farmers who contribute to the corn 
check-off programs and 26 affiliated organizations.
    NCGA's 2007 farm bill Commodity Title proposal reflects our 
view that the time has arrived to adopt fundamental policy 
changes. This Congress has a rare opportunity to consider major 
reforms at a time when prices are strong for most crops and 
exports are expected to reach a record $77 billion in 2007. And 
thanks to your continued support, renewable energy from home-
grown crops are now playing a much larger role in enhancing the 
country's energy security.
    First, it is important to note that NCGA supported the 2002 
farm bill for the improvements it made to our agricultural 
policy. Looking forward, though, today's farm safety net is 
simply not designed to meet producers' long-term risk 
management needs given the dynamic changes underway in U.S. 
agriculture.
    Our rapidly changing corn industry has created many new 
opportunities for producers. Projected price trends for corn 
and other commodities indicate that the current marketing loan 
assistance and countercyclical programs will provide, at best, 
minimal support over the next 5 years.
    NCGA is proposing reforms to the farm bill that would 
ensure better protection against volatile markets and 
significant crop losses. In early March, our delegates voted in 
strong support of a ``county-based revenue countercyclical 
program integrated with Federal crop insurance for corn, and 
potentially other commodities.''
    Rather than target low prices, the new Revenue Counter 
Cyclical Program would compensate producers when a county's 
actual crop revenue falls below its target level. In most 
recent years, RCCP payments would be triggered by the same 
losses that lead to the great majority of the crop insurance 
indemnity payments. The RCCP is then integrated with Federal 
crop insurance to ensure a more targeted and cost-effective 
farm safety net.
    Integration of these core programs would reduce the price 
risk and widespread production risk now borne by private 
insurance companies. With private insurance companies only 
paying for losses not covered by the RCCP, the lower 
indemnities paid to farmers would significantly lower program 
costs. Analysis provided to us indicate farmer-paid premiums or 
buy-up revenue insurance would drop significantly.
    Another key advantage is the built-in standard disaster aid 
that automatically delivers payments in counties that suffer 
low crop revenue, saving almost $1.8 billion spent annually on 
ad hoc disaster assistance.
    The final component of NCGA's proposal is to change the 
nonrecourse loan program to a recourse loan program, a step 
that would significantly increase the market orientation of 
U.S. farm policy. A recourse loan would continue to give 
producers harvest time liquidity which increases their ability 
to market their crop at a more profitable time.
    NCGA believes the time is right for these reforms and urges 
the Congress to provide the necessary resources to take 
advantage of this opportunity. The integration of a county 
revenue countercyclical program with Federal crop insurance 
secures substantial budget savings from a more efficient 
delivery of individual revenue insurance as well as spending 
offsets from replacing the nonrecourse marketing loan and 
price-based countercyclical program.
    Based on 95 percent county target revenue coverage and a 2-
year transition period, the annual cost of this new safety net 
is projected at approximately $500 million above the CBO's 
March baseline. At this level of protection, we are confident 
in our proposal's potential for long-term savings and promise 
as a superior farm safety net.
    Mr. Chairman, NCGA stands ready to work with you and your 
colleagues in the months ahead as you begin crafting this new 
farm bill. I thank you again for this opportunity and look 
forward to answering any questions that any of you might have. 
Thank you.
    [The prepared statement of Mr. McCauley can be found on 
page 134 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. McCauley.
    Now we turn to Mr. Dusty Tallman, a wheat grower from 
Brandon, Colorado, currently serving as Chairman of the 
National Association of Wheat Growers Domestic and Trade Policy 
Committee, here on behalf of the National Association of Wheat 
Growers.
    Mr. Tallman, welcome to the Committee. Please proceed.

   STATEMENT OF DUSTY TALLMAN, NATIONAL ASSOCIATION OF WHEAT 
                   GROWERS, BRANDON, COLORADO

    Mr. Tallman. Thank you, Mr. Chairman, members of the 
Committee. I appreciate the opportunity today. We would like to 
talk about a few of the challenges facing the wheat industry 
and then make our recommendations for the 2007 farm bill.
    Wheat growers across the U.S. have realized that our 
industry is suffering from several challenges, and we are 
trying to address those. We have had some wheat summits here 
lately and are trying to get the industry together with us to 
decide what positions we need to take to address those 
challenges. The challenges range from lower net returns per 
acre than some of the other program crops, lower levels of 
support than other program crops. Wheat has a very limited 
access to advanced genetic technologies than some of the other 
crops do. And we have kind of got a flat demand and have for 
several years worldwide. An awful lot of our wheat gets 
exported, but there are other places in the world that do a 
better job of subsidizing their production and selling their 
wheat cheaper than we do.
    We have spent the last couple of years looking at various 
farm bill proposals, and we have kind of decided what we have 
heard from a lot of the panel today, it is not broken, let's 
not try to fix it. We do think there needs to be some 
adjustments made because wheat has been on the short end of the 
stick for the last 5 years.
    We support the current farm bill, even though we have 
received little or no support from two of the key commodity 
programs: the countercyclical program and the loan deficiency 
payment. We have had severe weather across much of the wheat-
growing region. In Colorado, we have had 6 of the last 7 years 
with below average crops, which has led to significantly lower 
yields and, in places, no yield at all, and an LDP does not do 
us much good when you do not grow a bushel of wheat.
    In addition, in 2002, our target price was set lower than 
market conditions indicated it should be, and there has been no 
countercyclical payment for wheat for the entire life of the 
farm bill so far. That safety net failure has hurt many of our 
growers. The only benefit we have seen from the 2002 farm bill 
has been the direct payment.
    We have got a chart in the testimony which shows the 
inequities of how the payments have gone to the different 
crops.
    We understand the need of the producers of the other crops. 
We do not think that their safety nets ought to change, but we 
do need to work on creating a more equitable situation for 
wheat. In that light, we are recommending that the direct 
payment be continued and for wheat be set at $1.19 and a target 
price of $5.29 and maintain the current loan program. We 
arrived at those figures based on using cost of production. We 
have heard that from a lot of groups, that it is not so much 
what you can sell something for. It is most important what your 
cost of production is.
    That gives wheat an effective price of $4.10, and when you 
look forward in the projections for the next 5 years of a new 
farm bill, we still probably would not have a countercyclical, 
but we do deliver a lot higher level of support.
    We have heard that many organizations think the direct 
payment has a direct increase on rental rates and land prices, 
and yes, they do, but so do countercyclical, so do conservation 
payments, so does the high price of commodities across the 
country. I do not think we want to do away with any of those.
    We took into serious consideration our negotiations and 
obligations looking at farm policy. The direct payment is still 
the closest to a green box thing we have, and if you can get 
the fruit and vegetable problem solved, it is green box.
    Last, we would support an increase in payment limits 
commensurate with the increase in the direct payment. We 
understand it has been a very heated issue in the past, but we 
believe that you cannot use means testing to decide who does 
and does not get payment, especially since payment limit 
proposals in the past have always targeted direct payment more 
than they have the others. And wheat producers have relied 
simply on the direct payment.
    We thank you for having the meeting here today, and we look 
forward to working with you and the rest of the Committee on 
the farm bill. Thank you very much.
    [The prepared statement of Mr. Tallman can be found on page 
246 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Tallman.
    And now we will end up this panel with Mr. Paul Combs, USA 
Rice Federation and U.S. Rice Producers Association. Mr. Combs 
of Kennett, Missouri, is a rice, cotton, soybean, and wheat 
farmer, currently serving as Vice Chairman of the USA Rice 
Federation, and is Chairman of the Federation's USA Rice 
Producers Group.
    I understand you are testifying on behalf of both groups 
this morning. Welcome, Mr. Combs. Please proceed.

STATEMENT OF PAUL COMBS, USA RICE FEDERATION, KENNETT, MISSOURI

    Mr. Combs. Good morning, Chairman Harkin, Senator Roberts, 
and Senator Lincoln. I am pleased to appear today on behalf of 
both rice organizations.
    The rice industry strongly supports continuation of the 
current farm programs within the Commodity Title of the farm 
bill. We believe the structure of three-pronged safety net of a 
nonrecourse marketing loan, direct payment program, and 
countercyclical program, along with planting flexibility are 
working as designed to ensure a safety net for producers.
    We strongly oppose any further reduction in the payment 
limit levels provided under the farm bill and oppose attempts 
to apply means test. Payment limits have the negative effect of 
penalizing viable family farms the most when crop prices are 
the lowest and support is the most critical.
    We were very disappointed that the recently announced Free 
Trade Agreement with South Korea singled out U.S. rice as the 
only commodity for which no new access will be granted. The 
failure or refusal of our Government to further open markets 
like Cuba and South Korea underscores very clearly the 
importance of a strong domestic farm program safety net for 
rice producers.
    While we support the overall structure of the commodity 
programs, there are some specific legislative adjustments 
within the programs that are needed. First, the statutory loan 
rate for rice is set at a national average of $6.50 per 
hundredweight, and it has remained unchanged since 1989. Since 
the enactment of the 2002 bill, the support provided by the 
rice loan compared to variable costs of production has fallen 
by 33 percent. As such, to the extent that additional funds 
become available above the baseline, we are seeking a modest 
increase in our rice loan rate from the current rate of $6.50 
to $7 per hundredweight.
    Second, while the statutory loan rate for rice is set at 
$6.50, there are currently three distinct loan rates by class 
that are set by USDA. USDA has recently undertaken efforts to 
rebalance these loan rates, and we have concerns with the 
approach used by USDA in the process. After analyzing the 
issue, we believe the most appropriate course is to set the 
loan rate at the same level for all classes of rise, and we 
urge this Committee, as you draft the farm bill, to include 
statutory language directing USDA to set the national loan rate 
for each class of rice at the same level as established in the 
farm bill.
    Third, we are concerned with the current methodology used 
by USDA in calculating the adjusted world price. The current 
process employed by USDA is essentially a black box approach 
and provides little transparency. We believe by putting in 
place a transparent, verifiable formula for calculating the 
adjusted world price, the industry could have greater 
confidence in the process, and we look forward to working with 
you and the Committee on this issue.
    In reviewing the USDA farm bill proposal, it is 
disappointing that many of the changes, particularly in the 
Commodity Title, would have the damaging effect of weakening 
and in some cases practically eliminating the farm safety net 
that the farm bill is intended to provide. The proposed 
$200,000 adjusted gross income rule would injure U.S. farmers 
as they fight to compete on a very lopsided global playing 
field. It would make our farm policy unpredictable, 
inequitable, and punitive to farmers and those in rural America 
who rely on a strong farm policy.
    The provision would also have serious consequences as it 
relates to rental arrangements between landowners and 
producers, and we urge you and the Committee to oppose this 
provision of the USDA farm bill proposal.
    We support maintaining a strong Conservation Title in the 
farm bill that emphasizes working lands programs, such as the 
Conservation Security Program, but not at the expense of 
current commodity programs. Conservation programs alone cannot 
function as a replacement for the current commodity program 
safety net.
    Overall, we support a continuation of the basic commodity 
program structures with the changes we referenced earlier. We 
continue to believe that our current farm programs are a 
fiscally responsible approach to farm policy and provide a 
safety net when needed.
    Thank you again for the opportunity to testify, and I would 
be pleased to respond to questions at the appropriate time.
    [The prepared statement of Mr. Combs can be found on page 
101 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Combs, and I 
thank the entire panel for your excellent testimonies.
    I have two thrusts. One, this has to do with the planting 
of fruits and vegetables on program acres. A dispute panel of 
the World Trade Organization has determined that the current 
restrictions here of planting fruits, vegetables, and wild rice 
on base acres affects whether the United States can categorize 
direct payments as green box. Now, if we eliminate the planting 
restriction, we would anticipate some increase in production of 
fruits and vegetables. It is not clear whether this would be 
good and that the consequences would be--how dramatic those 
consequences would be.
    I just want to know, each of your organizations, do you 
have any position on the planting flexibility issue? Mr. 
Hoffman.
    Mr. Hoffman. Yes. The jury is really out with the corn 
consultations on whether fruits and vegetables should be 
planted on program acres. So I think for the next 3 to 5 years, 
we do not really know. The cotton case set a precedent, of 
course.
    Chairman Harkin. Yes.
    Mr. Hoffman. But there will be further rulings, and in 
light of the high prices and low outlays that are projected 
over the next few years, ASA's position is that we should not 
remove the planting restriction.
    Chairman Harkin. OK. Mr. Pucheu?
    Mr. Pucheu. We support the current restrictions, and I am a 
specialty crop producer in California, and you just do not jump 
in and out of specialty crops. So I do not think--if the 
restriction was removed, I do not think you would see a huge 
surge in the production of specialty crops.
    Chairman Harkin. Mr. Mitchell?
    Mr. Mitchell. If a farm bill were passed similar to what we 
proposed here today, there would not be payments anyway. So I 
do not think there would be a problem with elimination. But 
contingent on passage of something similar to what we are 
talking about, under the current bill I think that is a 
protection that should be afforded to that sector of production 
agriculture.
    It also goes back to the issue of, Are we going to write 
our farm bills at Geneva or within the WTO, or are we going to 
write them here? I know we have got to interact with the thing, 
but, you know, we have, I guess, been out of compliance on this 
by WTO ruling for some time now. So, you know, it is not that 
we are a strict adherent to all of the rulings of the WTO.
    Chairman Harkin. Although I would say I must give a 
rejoinder on that, there is a clause in the Constitution of the 
United States, which we are sworn to uphold and defend, that 
says that treaties are the supreme law of the land. So we do 
have to be cognizant of that in terms of any legislation we 
pass here.
    Mr. McCauley, what do you think about that? How about your 
organization?
    Mr. McCauley. We recognize the issue, and we really think 
that it is probably a little bit deeper than just a WTO issue, 
because you do have these groups wanting to be part of the farm 
bill, wanting to share the money. I think it is an issue of how 
much and where does it come from, what is the issue that 
farmers today that get Government support have a lot of 
strings. Are we talking about how this--does this go as 
research? You know, we are hearing a lot about food safety this 
week here, the marketing issue.
    I think as everyone said here, it is important to recognize 
just how it gets done, but I think it is probably a little bit 
more than just a WTO issue. So we do recognize that our policy 
says that we are for free trade. We want to make sure we do not 
want to do it just because somebody says we have to, but we do 
recognize that.
    Chairman Harkin. Got it.
    Mr. Tallman, on the planting flexibility.
    Mr. Tallman. Sure. The National Association does not have a 
policy. We have addressed it several times, and really have not 
been able to decide which side of the issue we are going to 
come down on until we get a little more formal acknowledgment 
of where the cotton case is going.
    Chairman Harkin. Mr. Combs?
    Mr. Combs. Mr. Chairman, the rice industry supports 
maintaining the restrictions. I am not a lawyer, but we 
understand it is not settled completely in the WTO, and to the 
extent that our administration would fight for our programs in 
the WTO instead of apologizing for them, that would be helpful.
    Chairman Harkin. Well, I think it is an important issue for 
us to consider because I am hopeful that this Committee and the 
Committee in the House as we hammer out this farm bill will do 
all we can to promote more consumption of fruits and vegetables 
in this country, in our schools and in the general public, food 
stamps, WIC program, things like that, whatever we can do, to 
follow the new dietary guidelines published by the USDA. At the 
same time, if we are going to do that, then we are going to 
have to promote more production. How we do that I am not quite 
certain right now, and that is why I asked that question on the 
program crops and whether we--because we do face a problem in 
WTO.
    Now, you may say it is not clear cut, but it is close. I 
mean, I do not think it is a close call. I think they are going 
to come after us on it when we look to the cotton case.
    My time is up, and now I would turn to Senator Roberts.
    Senator Roberts. Well, thank you, Mr. Chairman. I have 
often wondered if the specialty crop folks would like to have 
an approved conservation plan and go into the FSA office and 
fill out all the regulations and have to buy crop insurance 
like all the other program crops. I think they should be 
welcome to do that if they would like to get in the program.
    Let me say, Mr. Pucheu, do you understand that Stephen 
Foster, when he wrote that song, ``Those old cotton fields back 
home,'' he was talking about Kansas?
    Mr. Pucheu. I know there is a lot of new cotton in Kansas.
    Senator Roberts. We had about 160,000 acres, 180,000 acres, 
headed for 200,000, and then this business some called ethanol, 
and we are seeing some acres going to corn for some reason. But 
I just wanted your understanding of that. I am trying to wake 
up John McGuire back here, you know, to make sure he 
understands the close relationship I have with the National 
Cotton Council.
    Mr. McCauley, Ken, it is always a pleasure to have a good 
Kansas producer seated on the panel. I applaud your 
organization for coming up with some innovative ideas to move 
agriculture forward. I am going to ask a question that I wanted 
to ask Bob Stallman of the Farm Bureau on the previous panel.
    Several organizations, including yours, have suggested 
moving the countercyclical program to one based on revenue 
rather than price. That was always No. 3 in my farm speech, 
saying we had to study it. And basically you come up with a 
county-by-county basis. Other proposals look at a national 
plan, a statewide plan. We even heard about a township plan. I 
am not sure we could do that. But, at any rate, can you explain 
why you all settled on a county-wide basis and then your 
proposal does not cut any direct payments either, as I 
understand?
    Mr. McCauley. That is right, Senator Roberts. We do not 
propose cutting the direct payment at all. We think that 
provides a lot of security and stability for the farmer 1 year 
to the next. We have heard all about what we should do with 
that this morning, but that is where we stand on the direct 
payment.
    We chose county yield because that would get you as close 
as we think we need to be to what that farmer is actually 
producing on his farm. There are a lot of individuals that 
would like to get it down to the township because of the 
variability within a county. But we think that is close enough.
    The other thing that is really important here is that, with 
our proposal, a producer could still buy up production with the 
traditional crop insurance policies that they have today at the 
level of risk they feel they need. So we think that is really 
one of the important aspects of this, that the farm safety net 
from the FSA office would be at this level with what we are 
proposing with the RCCP, but your crop insurance would still be 
in effect.
    Senator Roberts. I appreciate that, and thank you for your 
work on it.
    Mr. Tallman, it is good to see you again, Dusty. I have 
known you for a long time. The only difference between where 
you are from and western Kansas is the State line. Are you 
going to let any water out of the John Martin Dam so I can 
float on an inner tube in Dodge City in the Arkansas? Or are 
you going to keep all that water for yourself?
    Mr. Tallman. We are going to try to keep it all.
    Senator Roberts. That is what I figured.
    [Laughter.]
    Senator Roberts. Your organization is advocating for an 
increase in the direct payment. As you are aware, there are 
some groups who do not like the direct payment because they say 
it is completely absorbed in the increased rental rates and 
land values. Can you explain why this is not an issue or why 
you do not believe this to be true?
    Mr. Tallman. Well, I do think that--and, by the way, 
instead of reading my statement, I was just going to ask that 
yours be reread again from earlier this morning. You did a lot 
better job of presenting your ideas than I did.
    Senator Roberts. Well, but you would have to get permission 
from the Chairman, and he is a tough fellow.
    Mr. Tallman. We just do not think they are. Any income 
stream you can attach to a piece of property is going to 
increase the value of that property. You know, if I lived 20 
miles east of Denver, my property would be worth an awful lot 
more than it is in eastern Colorado or western Kansas. The 
direct payments, yes, I would say they probably do increase the 
rental rates, but so do CRP payments, CSP, any kind of an 
income stream that comes to that piece of property that they 
can feel fairly sure is going to be there, and probably the 
prime example is my friends here with corn, $4 corn. I am sure 
that has had a lot more effect in the Midwest than the direct 
payment has on corn ground.
    Senator Roberts. I appreciate your answer.
    Mr. Chairman, I yield back.
    Chairman Harkin. Senator Lincoln?
    Senator Lincoln. Thank you, Mr. Chairman, and I apologize 
not getting back in time for the first panel. I may have a few 
questions I would like to submit for the record. We are on a 
tight schedule around here, kind of damned if we do and damned 
if we do not. We miss the votes on the floor, or we miss the 
Committee. So we are back and forth.
    But we are grateful to this panel of witnesses. We 
appreciate very much you being here. We also really appreciate 
the men and women, the farmers that you represent, the 
producers across this country who do continue to provide a safe 
and abundant and affordable food supply for the world. And I 
think that, you know, as we look at that and realize what a 
blessing that is for this country and for the globe, whether it 
is dealing with the economy in rural America or whether it is 
feeding the hungry, Americans do it really well, and the 
American farmers are really those that we have to thank. So we 
thank you for that.
    I just wanted to pose a question to all of you in terms of 
support in moving funding out of the Commodity Title and into 
other titles of the farm bill. We all support so many of the 
good things that are in the farm bill, but we also know that 
conservation and nutrition and a host of other things are 
really not possible if we cannot keep production agriculture in 
production. But I am just interested whether you do support 
cutting the existing safety net for farmers in favor of funding 
other initiatives that are out there. And I do not know, in 
terms of seeking improvements to the current safety net rather 
than cuts, I guess the bottom line really is--do you feel like 
that there is less of a need for a safety net now than there 
was in 2002 when we put together a bill that I felt like was 
very strong and supportive of producers?
    Mr. Hoffman. I guess I will start. You know, we do have 
some pretty good prices right now, particularly in soybeans and 
corn. But if you look at our input costs from 2002, my costs at 
home on a farm in Iowa are probably double. You know, we are 
highly dependent on energy, so our costs have doubled. So, in 
effect, our safety net has been effectively reduced at this 
particular time, too, because of the cost structure.
    So I think it would be pretty shortsighted to write a farm 
bill to reduce the Commodity Title, the safety net support. I 
think we need to look forward to a time that we are in right 
now with increasing demand around the world, not just feed and 
fuel, but demand for our products is going up.
    So the farm bill needs to be crafted in such a way that 
incentivizes production in times of low prices, and I think 
that is exactly what the current structure of the farm bill is 
doing, with a few minor improvements.
    Senator Lincoln. Thank you.
    Mr. Pucheu. I think the safety net is very important to the 
cotton industry at the present time because we are going 
through a period of low prices, and this is mainly because of 
our transition in our markets from supplying primarily a 
domestic textile industry to now we export probably 75 percent 
or more of our crop.
    Mr. Mitchell. I think part of the answer to your question, 
Senator, is the definition of ``safety net,'' and that is why 
we proposed the farm bill that we did, because our definition 
of a ``safety net'' is a minimum price floor for our 
commodities so that we are not dependent on taxpayers. And 
under the current circumstances that you face in writing a farm 
bill, the current budget, we feel that we have got the best 
option. That way you do have a way of moving additional funds 
into the Energy Title, into CSP, into Nutrition.
    I would have to say that contingent on passing something 
like we are talking about, we would be reluctant on moving a 
whole lot of money to those other areas, with the exception of 
probably the Energy Title. I think that a few dollars go a long 
ways in that title in helping build rural economies and helping 
our country move toward energy independence.
    Mr. McCauley. We do not feel that we should move the 
Commodity Title money to any other title, for one big reason: 
that it does provide a lot of stability for agriculture as a 
whole, but for that farmer who has an opportunity to invest in 
a rural development project close to him, that stability will 
let him go to the bank, borrow the money, do the things. And I 
can tell you personally that has been a real benefit to me. It 
has allowed--it will allow farmers and bankers the stability to 
keep that there. So we think the Commodity Title money should 
stay where it is.
    Mr. Tallman. We would have to agree with that, I guess with 
the direct payment and our crop insurance in at least the areas 
affected by the drought, that has kind of been all the income 
that has kept us going over the last few years. And if you were 
to reduce that amount, I think it would hit quite a few 
producers that would be in more trouble than they are. We have 
been using our equity as it was in those drought States.
    Mr. Combs. Senator Lincoln, we do not support moving money 
out of the Commodity Title. Assuming that crop prices will 
remain high forever is one that history tends to disprove.
    Senator Lincoln. Well, and it is so interesting, too, 
because we are all very interested in alternative fuels and 
alternative energy sources, and that being a relatively new 
title in the bill does not seem like it would necessitate us 
moving money or resources from one of the long-term titles of 
our bill, but maybe looking for new dollars to be able to 
support new endeavors and new opportunities for our producers 
to yet grow into another industry side or certainly another 
value added to their production and their crops.
    Mr. Combs and Mr. Pucheu, some use varying statistics that 
cite the majority of farm program payments are going to fewer 
than 20 percent of the farmers as a reason to place further 
payment limits and eligibility requirements on farm programs. 
And yet we know that per pound or per bushel support is 
consistent across producers, regardless of their size.
    Given the risk and the investment that many of your 
producers have in their operations in order to compete in a 
very uncertain global marketplace--you mentioned China and our 
ability not to be able to address that market, Korea, not being 
able to, again, have market access in those places. Can you 
describe the impacts of the proposal to change the existing 
payment limitations and eligibility requirements and what type 
of production shifts are likely to occur? I personally do not 
think we are going to grow cotton or rice in other parts of 
this country. It is going to probably go somewhere else. But we 
would love to hear your----
    Mr. Pucheu. Well, the shifts would be out of cotton and 
rice into something else, probably. You are seeing the shift 
out of cotton this year into soybeans and corn.
    I think when you are talking about 20 percent of the 
farmers getting a significant portion of the money, I think, 
again, as was raised with the first panel this morning, you 
have to look at how you define a farm, too, and what is a full-
time commercial farm. And if you look at it that way and take 
people that are not full-time farmers out of it, I think your 
statistics would look at little differently. And then----
    Senator Lincoln. Well, there is also statistics that say 
that about 90 percent of the production comes from 10 percent 
of the producers.
    Mr. Pucheu. Right, your commercial farms. You have to have 
a certain scale of operation to be able to afford the equipment 
you need. You know what a cotton harvester costs or a rice 
combine. You need a significant amount of acreage to spread 
that over.
    Senator Lincoln. That risk.
    Mr. Combs?
    Mr. Combs. I agree with what Mr. Pucheu says. The land that 
is getting the payment is the land that is producing the crop. 
We also happen to be in the farm machinery business, and with 
cotton pickers costing and combines costing over $400,000, the 
economy of scale that is needed to be efficient in a global 
marketplace is not there when you artificially limit the access 
to the safety net by imposing payment limitations.
    Senator Lincoln. Well, and when your world market price is 
at a pretty low price.
    Thank you, Mr. Chairman.
    Chairman Harkin. Thank you.
    I have one follow-up question. There has been some 
reference this morning to Washington Post articles. There were 
several of them last year and a whole series of them in 
December. A Washington Post article last summer made the case 
that a significant portion of our farm program payments go to 
individuals who do not even farm. The Post article claimed that 
the farm programs have paid $1.3 billion to such individuals 
just since 2000.
    The lead paragraph references an asphalt contractor who 
built his dream house on rice base and receives about $1,300 a 
year. Now, let me read that. It says here, ``Even though Donald 
R. Matthews put his sprawling new residence in the heart of 
rice country, he is no farmer. He is a 67-year-old asphalt 
contractor who wanted to build a dream house for his wife of 40 
years. Yet under a Federal agricultural program approved by 
Congress, his 18-acre suburban lot receives about $1,300 in 
annual `direct payments' because years ago the land was used to 
grow rice. Matthews is not alone,'' and then it goes on to say 
that there is about $1.3 billion in subsidies. ``Some of them 
collect hundreds of thousands of dollars without planting a 
seed. Mary Anna Hudson, 87, from the River Oaks neighborhood in 
Houston, has received $191,000 over the past decade. For 
Houston surgeon Jimmy Frank Howell, the total was $490,709. `I 
don't agree with the Government's policy,' said Matthews, who 
wanted to give the money back but was told it would just go to 
other landowners. `They gave all this money to landowners who 
don't even farm, while real farmers can't afford to get 
started. It is wrong.'''
    ``A few hundred yards up a gravel and dirt road, oilman 
Rene Hammond purchased 20 acres in May of 2003. His two-story 
house and garage sit on part of the land and are appraised at 
$338,140, records show. His payments have been about $4,500, 
according to USDA records. `The money is free,' Hammond, 48, 
said, adding that he thought the money should go to real 
farmers. `You don't have to do anything but keep the ground.'''
    ``When Donald Matthews bought his 18-acre tract from Petty 
in 2002, he never expected to receive farm subsidies. `I was 
informed by Mr. Petty there was a rice base and I was entitled, 
and I said, ''What do you mean I am entitled? I am not going to 
farm rice.``' But nine of Matthews' acres are classified as 
agricultural land for which he has received more than $5,000, 
records show.''
    ``Diana Morton Hudson is a corporate securities lawyer 
whose 87-year-old mother, Mary Anna Hudson, owns an interest in 
two tracts of land in nearby Matagorda County. USDA records 
show that Mary Anna Hudson has received $191,000 since 1997 on 
land she doesn't farm. `We just pay someone to mow it, and it 
just sits there,' Diana Hudson said.''
    ``Later, she added: `I'm a corporate securities lawyer. I 
couldn't even locate these two parcels in Matagorda.'''
    Well, how can we justify these payments to the taxpayers of 
this country, Mr. Hoffman? How do we justify this?
    Mr. Hoffman. Well, I am not familiar with any of those 
cases you cited. You know, they probably are real cases----
    Chairman Harkin. Well, I have never had--no one has ever 
come to dispute these articles in the Post. No one has ever 
said these are not real people and these are not happening. I 
want to know how we are supposed to--and I am not picking on--I 
am going to go down the aisle. Mr. Pucheu, how do we justify 
this to the taxpayers of this country?
    Mr. Pucheu. I do not know how we justify it. I do not know 
what the answer is. But the vast majority of payments are going 
to commercial farmers like the panel.
    Chairman Harkin. But the $1.3 billion to individuals who do 
no farming at all? We could use that in our baseline.
    Mr. Mitchell, how do we justify this?
    Mr. Mitchell. I do not think we can justify it, and I 
commend you for trying to fix this in 1996 in the final 
deliberation of the bill. It was your amendment that was going 
to require people to plant a crop before they could get those 
payments.
    Chairman Harkin. That was my amendment.
    Mr. Mitchell. If I am not mistaken, it failed by 1 or 2 
votes.
    Chairman Harkin. That is exactly right.
    Mr. Mitchell. You and I and a lot of other people saw the 
problem at that time. But I think it is a lot larger problem 
than just some urbanites or suburbanites that are getting these 
payments. We saw issues in Texas where very large rice acreage 
is still drawing the payments, but they have gone into the cow-
calf business.
    Now, I would think that the cattlemen would be as concerned 
about this as the fruit and vegetable growers are about their 
restriction. In other words, that acreage is getting a subsidy, 
and they are in the cow-calf operation, and I think that would 
put them on unequal footing.
    But to come back to our proposal, you have got to raise the 
crop to get the benefits under our plan.
    Chairman Harkin. This article went on to point out about 
how some cattle farmers in Texas continue to receive these 
payments, even though they are raising cattle on what was 
formerly riceland.
    Mr. McCauley, how do we justify these payments?
    Mr. McCauley. Well, I do not think we can justify it to a 
person who has built a house on it and is sitting there in his 
yard. I think some of the reasons that went around freedom to 
farm, our ability to move from one crop to another, was the 
reason for it as a farmer. But a person not farming, not doing 
anything with the land except being non-ag use, you had the 
right idea.
    Chairman Harkin. I had that amendment.
    Mr. McCauley. Yes. I agree with you.
    Chairman Harkin. Mr. Tallman, how do we justify these 
payments?
    Mr. Tallman. I agree. I do not think there is any way you 
can justify them. I would assume some of that also comes about 
by--in our country when people put ground in CRP, quite a 
little of it was sold fairly soon, it was--we actually sold 
some to--I think it was a group of doctors out of Iowa, and I 
do not even know who owns the ground anymore. It has never been 
farmed. It has put in grass, and it stayed there. They receive 
the check every year.
    Chairman Harkin. Mr. Combs, how do we justify it?
    Mr. Combs. Mr. Harkin, I do not think you can justify it on 
that handful of examples that the Washington Post has or the 
New York Times can dig up or the Wall Street Journal. But that 
was part of the direct payment program to make it decoupled and 
green box. And to the extent that there is more rice base in 
Texas and we could move that to Missouri where we are planting 
more than our base, that would be beneficial, but that costs 
money in the program. So there is a tradeoff on all of it. I am 
not trying to justify that handful of examples.
    Chairman Harkin. Well, I am just saying it comes to $1.3 
billion. I have asked people to dispute this, if that is right 
or wrong, and I have never seen any disputation of that figure 
at all. I mean, that is a lot of money going to people who do 
not even farm. And these are things that we are going to have 
to answer. This is not the last of those articles--well, I do 
not know. I assume they are not the last of those articles that 
we are going to see.
    Did any other Senators have anything to add? I will thank 
the panel very much--Senator Chambliss, go ahead.
    Senator Chambliss. Sorry, Mr. Chairman. I have had a wrath 
of folks in town today that I had to go visit with.
    Mr. Pucheu, let me start with you. Some believe that 
marketing certificates are simply a way to get around our 
payment limits. From a practical standpoint, what happens to 
the cotton marketing system if we eliminate payment 
certificates in the next farm bill?
    Mr. Pucheu. Well, we have got a real problem because I 
belong to a large cooperative that markets Western cotton, and 
to try and separate cotton that is eligible and not eligible 
would be a major problem. If you did not have certificates, you 
would have a lot more cotton forfeited in the loan, which would 
greatly add to the Government cost. So in the long run, the 
government is better off by having certificates than not having 
them.
    Senator Chambliss. Is it a way to evade payment limits?
    Mr. Pucheu. It is a way to efficiently market the commodity 
and not build stocks.
    Senator Chambliss. Mr. Tallman, in your testimony you note 
that you have examined the various revenue proposals and found 
that they do not work well for wheat. Have you looked at the 
Farm Bureau's State-level revenue proposal? And if so, what are 
your thoughts about that?
    Mr. Tallman. We have. We have looked at the Farm Bureau's. 
I think we have looked at all of them except a couple that we 
have just gotten in the last night or two.
    Wheat grows in kind of a different part of the country. Our 
yields range from 15 bushel to 100 bushel, depending on where 
it is grown in the country. On a State level, it looks like it 
was very difficult. It looks like you are still going to have 
producers out there that are going to need disaster--even if 
you have a revenue program. We have not looked at the county, I 
guess.
    Our thoughts were that we have got 70 percent RA insurance, 
70 percent CRC insurance. In our opinion, that is what these 
programs do, is they insure you against a 70-percent--or up to 
a 70-percent level. Let's write the farm bill right now and fix 
the insurance in a year or two and try to make it better to 
where we do not have to work.
    The other problem with wheat was that if you base wheat on 
a historical basis, Colorado, we have ranged from a State 
average from 24 to 34 bushel the last 6 years under this 
drought. We are going to start out at a very low target revenue 
on the State level. And it is just not going to be good for us, 
at least in that State, and I know that there are a few other 
States that have similar problems.
    Senator Chambliss. So is it a fair statement to say that 
the Wheat Commodity Title in the 2002 farm bill has worked for 
wheat growers in some parts of the country, but it has not 
worked for wheat growers in other parts of the country?
    Mr. Tallman. The direct payments work very well for us. We 
do not have anybody that has gotten benefits from the 
countercyclical or the loan programs, and it is because our 
target price was set too low.
    Senator Chambliss. Mr. Combs, there has been discussion by 
some to reduce direct payments and to use the savings to pay 
for higher loan rates, target prices, disaster assistance. How 
would rice producers feel about a proposal like that?
    Mr. Tallman. We would oppose that. We think that the 
current program is balanced and fair with the three-legged 
approach.
    Senator Chambliss. Let me ask you the same question about 
marketing certificates. From a rice grower's standpoint, is 
that a way to evade payment limits or does it help you from a 
market----
    Mr. Combs. It is a way to orderly market the crop. Over 
half the crop is marketed by three rice cooperatives in the 
South and California, and it would just add tremendous burden, 
both on those cooperatives and on the FSA offices in those 
counties to take away their ability to use generic 
certificates.
    Senator Chambliss. All right. Mr. Pucheu, last, what we do 
not want to do--and I will address this really to the whole 
panel, but what we do not want to do, gentlemen, is to draft a 
farm bill this year that is going to run into WTO problems. We 
do not want to have something to come up from a litigation 
standpoint in the middle of the stream that is going to all of 
a sudden throw each of your programs into an uproar. And if it 
happens to one, it would happen to all of them.
    So as we go through this, let me just say, John, you 
obviously know what has happened in the cotton industry and how 
it has affected us, and now not only have we lost step two, but 
they are looking at whether or not that was adequate to really 
provide a solution to the Brazil case.
    We want to make sure that with respect to all of our WTO 
obligations, with respect to all of our bilateral agreements 
that are out there, that we are not going to violate something 
in the middle of the stream here. So as we go through this, 
please give us your thoughts and your input in that vein as 
well as in what you think is going to be in the best interest 
of your growers, because certainly an interruption in the 
program, whatever it may turn out to be, is going to be a lot 
more catastrophic than what we may do relative to a penny or 
two here or there.
    So thank you very much for your input to this point. We 
look forward to staying in touch with all of you.
    Thanks.
    Chairman Harkin. Thank you, Senator Chambliss. I think that 
is an excellent point. We do have to be cautious about that as 
we proceed.
    Senator Grassley?
    Senator Grassley. Mr. Chairman, first of all, I want to 
compliment you for bringing up--as I was coming into this 
meeting late, since this panel took over--the issue about the 
abuse of the farm program, and that brings emphasis to 
something you and I have talked about and I am working with 
Senator Dorgan on, and that is, to have a hard cap payment 
limitation. That will save money, but it will also give us the 
ability to spend money elsewhere where it is needed where the 
benchmark is $15 billion below where we are now.
    But also I say that because, as a member of the Senate 
Finance Committee, it is our responsibility not only for your 
Committee but other committees as well to find some revenue to 
make up for some of the shortfall we have in the budget this 
year. So for all those reasons, it is very good that you 
brought that up.
    I am going to put a statement in the record.
    [The prepared statement of Hon. Charles E. Grassley can be 
found on page 81 in the appendix.]
    How would the revenue program that your organization 
suggests interact with crop insurance? Would adoption of the 
program improve delivery of insurance to farmers? And how do 
you judge the current state of the Crop Insurance Program if 
that is part of your reason for the revenue assurance aspect? 
Does it provide adequate revenue coverage for farmers? Would 
you tackle those questions? They are all kind of related. I see 
them as related, at least.
    Mr. McCauley. I sure could, Senator Grassley. We believe 
that when you integrate the crop insurance and the Government 
program together, our proposal looks very well that you are 
saving a lot of money that is overlap. And I do not think it 
is--you know, I do not know exactly where it goes, but I think 
it is probably just maybe waste, maybe just the fact that it 
just churns around in the system. But I do not think it is 
anybody's desire to hurt the crop insurance industry, at least 
from the National Corn Growers.
    We also think that the crop insurance industry could 
benefit from this and see it as an opportunity, because all of 
a sudden you have got 100 percent of the farmers involved in 
this level, which is the farm program, and you have got the 
rest of the farmers out there that have not been participating 
that should have cheaper premium policies to buy up coverage if 
they need it or just buy more if they want to feel more secure.
    So we feel the integration is a benefit to not only the 
taxpayer, which you will have less money spent on both those 
areas, the farmer who can actually buy up the coverage, and 
maybe even the Government FSA office having a simpler program 
to work with.
    Senator Grassley. Also, on a second question to you, I had 
15 town meetings in the last break in parts of my State on the 
farm program and got opinions from the grass roots. And I think 
I had representatives--and I do not know whether they are--I do 
not think they are in the leadership position right now of the 
association that were suggesting that we spend a lot less on 
direct payment. And it was my view that the Corn Growers 
Association--so I am asking you at the national level--was in 
support of the direct payments because it was one way of 
avoiding the trade-distorting aspects of other safety net 
programs.
    Mr. McCauley. The direct payments do fit into the green box 
very well, and that is why they are there. We think the direct 
payments do a lot more than that. They create stability for the 
farmers, for the bankers, for the system as a whole, from 1 
year to the next because, as we all know, there is always a 
time when you do not fit into one of the areas of a loss or 
market or wherever these programs seem to go.
    We think that the direct payment fits into that. We have 
talked about direct payments all day, and we have a position 
that we want to keep them.
    Senator Grassley. As is.
    Mr. McCauley. As is.
    Senator Grassley. OK. Thank you, Mr. Chairman.
    Chairman Harkin. Senator Lincoln?
    Senator Lincoln. Thank you, Mr. Chairman.
    I would just like to echo the words of my friend, Senator 
Grassley. I know.
    [Laughter.]
    Chairman Harkin. Is this a new relationship?
    Senator Lincoln. That is right. But to simply say we do 
appreciate you bringing up the egregious abuses that exist 
there in those that do not use the safety net programs for 
their intent. You know, clearly that is not the intent of the 
safety net programs, and I think that it is all of our jobs to 
look for a way where we can eliminate those types of 
circumstances, but not do so at the sake or the mercy of those 
good-faith producers who are working hard to produce a crop but 
simply get caught in the circumstances of growing different 
crops in different circumstances.
    And so I certainly hope that we can work together to 
realize that nobody wants to defend those types of 
circumstances or those types of causes. And we recognize that 
they were never the intent of what safety net programs were 
designed to do. And I would imagine, as you heard from the 
panel, every grower out there wants to eliminate those types of 
abuses in order to make sure that we can keep the good work 
that our producers across this country are doing. And I hope 
that we can work together to come up with that because I think 
there is a solution to be had where, again, we are eliminating 
abuses and going back to the original intent of what a safety 
net program is designed to do.
    I just had one last question for Mr. Combs, and we have 
talked--I know that Mr. Tallman has talked a little bit about 
it, and Mr. Hoffman mentioned about your input cost and the 
increase of input cost, whether it is fuels or other things 
that you have seen on your operations. But there are numerous 
plans to provide the countercyclical revenue insurance to 
producers. I wanted to know if you all had looked at those 
plans similar to what has been described or others have 
answered to and how they would impact rice producers and maybe 
even perhaps, you know, how productive any of the Crop 
Insurance Programs have been or could be to rice growers?
    Mr. Combs. With regard to rice, both the administration 
proposal and the Farm Bureau proposal and the National Corn 
Growers proposal are not as good as the current countercyclical 
program. We tend to have a price loss rather than a yield loss. 
We spend up to $1,000 an acre precision leveling and putting 
irrigation on farms to ensure pretty well that we do not have a 
yield loss, and, therefore, the Crop Insurance Program tends 
not to work for us, and we tend not to have the yield losses 
and we tend to have more price losses with the possible 
exception of Hurricane Katrina. So the revenue-based approaches 
to countercyclical did not work as well for the rice industry.
    Senator Lincoln. Does anybody else want to comment on that?
    Mr. Pucheu. They also do not work as well for the cotton 
industry. I know Dr. Bruce Babcock at Iowa State looked into 
the corn program, and I am not sure if it was the final corn 
program that Ken presented today. But it showed that the 
current countercyclical program worked better for cotton than 
these revenue programs did.
    Senator Lincoln. Thank you.
    Mr. Hoffman. I would echo that for soybeans, too.
    Senator Lincoln. Yes. Great.
    Thank you, Mr. Chairman.
    Chairman Harkin. Senator Chambliss?
    Senator Chambliss. Just two questions. First of all, to 
each of you, and I will start with you, Mr. Combs. You are all 
familiar, I know, with the administration's proposal that no 
one qualifies for any payments if you exceed $200,000 adjusted 
gross income. Give me a quick comment, starting with you, Paul, 
and going right down the row.
    Mr. Combs. You are going to shift the burden to the tenant 
farmer. You got people in our part of the country right now 
that are operating on 50-50 rent, where the landowner is taking 
50 percent of the risk and receiving 50 percent of the payment. 
If that landowner is locked out of the ability to market that 
crop through the marketing loan or access to payments, they are 
going to shift the crop rent, and what you are going to do is 
put the burden on the guy that is the beginning tenant farmer 
who is trying to rent a farm and farm rice to make a living, 
and you are not going to hurt the landowner.
    So the very people that the administration is trying to 
target are the people that are going to get slammed on this 
deal in rice country.
    Senator Chambliss. Mr. Tallman?
    Mr. Tallman. Our producers do not like it just because it 
is kind of a means test, and we do not think that is the way 
that it ought to work. I do not know how you come up with the 
$200,000 or $300,000 or what it is, but you could--wheat is 
kind of a different crop. We will a lot of times sell right at 
the end of a year. So you are going to have producers that stay 
under a certain level, can sell December 31st instead of 
January 2nd or vice versa, sell January 2nd. I think you will 
end up with people playing more games just to try and stay 
under that level.
    Mr. McCauley. Paul is correct. If you do that, you are 
going to be making a law that will just give people reasons to 
try to figure out how to get around it. We do not have policy 
on a means test, and that is basically what it is. So we think 
the current payment limit that is in effect today is where we 
are. That is where our policy is.
    Mr. Mitchell. There is always the challenge of one size 
fits all, different parts of the country, different crops. It 
is the same with housing or anything else we deal with, but in 
agriculture it is even more prominent. And the means test is so 
much different than payment limitation, and I am not sure that 
we would stick by that.
    One of the main reasons is with a means test and you 
eliminate somebody out of the program, you have just eliminated 
the environmental incentives that are inherent in the farm 
program to some of your largest producers. And I think that 
there is a benefit for the Nation as a whole for those 
environmental incentives to be in place for everyone.
    Mr. Pucheu. We support the current limitations. The chances 
of having a death penalty and the consequences of that, you go 
into a period of low prices and you are out of the program, you 
are going to have a serious, serious problem surviving with 
your farm, even if you are a large farm.
    Senator Chambliss. Mr. Hoffman?
    Mr. Hoffman. ASA supports the current payment limitations. 
We are opposed to means testing. One possible way that could 
harm potentially young farmers, particularly, would be if 
someone was on that bubble, they would bid up cash rents in an 
area to stay under that at AGI. So that would hurt not only--
that would harm indirectly neighboring producers.
    Senator Chambliss. Mr. McCauley, I have concerns about your 
recourse loan proposal, especially as I look at the situation 
that cotton is currently in. China is currently buying much 
less cotton than they were this time last year, and so the 
options that our cotton farmers have are limited, particularly 
with our domestic textile industry struggling. The loan is in 
most cases the best option producers have at the moment, not 
because it is lucrative but because there are not other good 
marketing options right now.
    So I am curious if you have thought through these types of 
situations that the market might take a sudden downturn in 
proposing the recourse loan for your commodity and potentially 
for other commodities. How would USDA recover loan proceeds if 
the commodity had been sold? And would USDA have a lien on land 
or other assets of the producer? And how would this affect 
existing financing?
    Mr. McCauley. Well, as far as cotton goes, it is definitely 
different than corn. There is probably not an answer from a 
corn grower to tell a cotton grower how good this would be 
because the cotton price is definitely in the opposite end of 
where corn is today.21We think that the corn price for the 
future looks like it would be above the loan road, and that 
would--and should--tell our growers to concentrate on the 
market. And I think that would be a good step toward actually 
showing producers that the market is there and take advantage 
of it.
    There is a problem with the way agriculture thinks and farm 
programs have worked that that nonrecourse loan has always been 
there just in case. And there are a lot of farmers that depend 
on that, so they do not really make the discussion.
    So we feel that the floor that we have put in this proposal 
replicates the marketing loan, that at the loan rate times your 
county yield you would not lose any more money than that. So it 
would not be exactly like the marketing loan, but it would look 
very close to it.
    Senator Chambliss. Thank you, Mr. Chairman.
    Chairman Harkin. I want to revisit this question about the 
adjusted gross income. The administration's proposal is that if 
you have an adjusted gross income--now, that is bottom line, 
that is what you make, that is what you get--of $200,000 or 
more, you do not qualify.
    I want to ask that question again in this context. First of 
all, keep in mind, Mr. Combs, we can apply it to landlords. 
That takes care of your problem. We just apply it to landlords 
as well as tenants. Apply it to landlords, that they would have 
to show that they have an adjusted gross income also.
    Think about it this way: We means-test food stamps. For 
anyone to get food stamps, they cannot have more than $2,000 of 
assets. They have to fall below a certain income line. Now, are 
they producers? A lot of them work very hard. A lot of them 
work darn hard every day to feed their families. They are 
producing for this country. Yet we means-test that. So if we 
means-test that, why shouldn't we means-test those who are 
making 200,000 bucks a year? That is more than we make. That is 
a pretty darn good income.
    So if we are going to means-test one end, a big end of our 
bill, nutrition, why don't we means-test the other end? So I 
want to revisit that question again. Let's go over it again.
    Mr. Combs, why shouldn't we say to the taxpayers of this 
country, you know, if you need it, yes, if you need this, if 
you are a struggling farmer, but if you have got $200,000, if 
you are a landlord and you have got over $200,000, you just 
don't qualify? Tell me again.
    Mr. Combs. In my example, the landowner did not qualify for 
the payments, and the 50 percent--the landowner was furnishing 
50 percent of the seed, 50 percent of the fertilizer, 50 
percent of the fuel, and was entitled by crop rent to 50 
percent of the crop.
    Chairman Harkin. Right.
    Mr. Combs. When they cannot access the Government loan to 
put the rice in the loan and market it that way, they switch to 
cash rent. So all of the risk of all the--the tenant is then 
paying for 100 percent of the seed, 100 percent of the fuel, 
and 100 percent of the fertilizer, and trying to go to a bank 
and borrow the money to make 100 percent of the crop instead of 
50 percent of the crop. He is taking on more risk, and the bank 
may or may not go along with that.
    And so I am suggesting that the tenant farmer is the one 
that gets hurt in that scenario. I would further suggest that 
the real beneficiaries of our farm policy are the American 
consumers who have the safest and most abundant food supply in 
the world, and if the benefit is accruing to the consumer, it 
is kind of like Medicare. I have got some friends that are 
doctors that, you know, maybe 75 percent of their income comes 
from Medicare, and I guarantee you, they are not means tested. 
And so if the benefit of Medicare accrues to the patient and 
the benefit of the farm program accrues to the consumer, then 
we should not be limiting the farm programs.
    Chairman Harkin. Well, Medicare is a trust fund, and surely 
you do not want farmers to be put into a trust fund, do you?
    Mr. Combs. I am not suggesting they are in the trust fund. 
I am just suggesting that other programs--tax incentives, 
research and development credits--are not means tested. And if 
the benefit of the farm program applies to the consumer, then 
we----
    Chairman Harkin. Would you be in favor of lifting means 
testing on food stamps?
    Mr. Combs. I would not be in favor of lifting means 
testing----
    Chairman Harkin. There you go.
    Mr. Tallman, again, let's revisit this $200,000 AGI if you 
apply it to landlords and tenants.
    Mr. Tallman. In my part of the country, we have not had a 
problem with this. It did not seem to matter how big a farm you 
were over the last 6, 8 years. Any kind of a profit has been 
difficult.
    One of the things that has always bothered--and I guess 
that is one of the things that has always bothered me about a 
limit, is just because you farm, as Mr. Roberts said, 10,000 
acres or 1,000 acres, that farmer, if he is in a drought and he 
is farming 10,000 acres, he has probably lost more money--well, 
he has definitely lost more money. He is probably going to have 
a harder time recovering than the small farmer. I think it is a 
little easier for the small farmer to recover.
    One of the questions I always had with the $200,000, or 
whatever figure it is, is if you are under it and you qualify 
and they make a payment to you and it puts you over it, does it 
disqualify you for the payment that puts you over it? And I do 
not know the answer to that one.
    But I have always been of the opinion that it should be 
more of a dollar-per-acre figure rather than pick a figure out 
of the air, and say if your net income is at this level, you 
are not going to qualify. I think that the payments should be 
tied to the land, and hopefully we can get away from the 
problems you have in the Wall Street Journal.
    Chairman Harkin. Well, you are not going to get away from 
them, especially with the budget limitations we have got right 
now and trying to figure out how we do these budget--we have 
had a philosophy in this Committee--I do not mean just this 
Committee; I mean the Ag Committee of the Senate and the 
House--since World War II that every bushel of program crops 
that were covered by programs, every bushel should be supported 
the same. Every bushel should be supported the same. That 
philosophy has held until now, until recent times. But you see 
where that gets you. The bigger you are, the more you get. And 
the more you get, you get land around you and you get bigger. 
And the bigger you get, the more you get, and it is like a 
black hole. So the bigger you get, the more you get; the more 
you get, the bigger you get; the bigger you get, the more you 
get. It just keeps going on, and questions are being raised. Is 
this the time to re-examine that philosophy that we have had 
ever since World War II, that every bushel of every program 
crop is paid the same no matter how big, no matter how small 
you are, and that we ought to be re-examining that philosophy, 
and that is why I ask about the administration's proposal and 
the $200,000 AGI.
    I have got to tell you, I have had the same town meetings 
that Senator Grassley has had in Iowa--I did not go to the same 
ones, but similar kinds, and this question comes up every time 
among farmers. I have had farmers in my State come up to me and 
say, ``Look, I am getting these payments and stuff. I am making 
good money.'' They say, ``I get it, but I know it is not 
right.'' And my State has been No. 1 in the Nation getting 
direct payments, I might add.
    So, again, you know, if we have got a lot of money, good 
baselines, maybe we do not have to worry about it. But I think 
now we are going to have to be concerned about it, and it is 
going to keep coming out.
    So I just wanted--any other thoughts on the $200,000, you 
know, if you would cover landlords and tenants, because that 
was the issue that was brought up earlier.
    Mr. McCauley. I really should just be quiet, but since you 
offered, if you have to do a means test, I think it is very 
hard to justify $200,000 as being needed. I think this adjusted 
gross income proposal that the administration put out has some 
unique qualities that we have not looked at before. When you 
look at net farm income or your adjusted gross on your taxes, 
the number, you could argue with where it should be. I think, 
you know, if you are just talking about a means test for 
qualifying, you know, we probably--that is the first step. But 
when you start talking about variable rate income--Paul brought 
it up before. If you are sitting on a high income this year and 
have a low, does that get you into the next year?
    I think we have got such variable incomes and you throw 
cattle and ethanol investments, things like that, you could be 
coming off of a--if you had a 3-year or 4-year average, there 
are a lot of things that could work, you know, to make that 
better. But there is going to be a lot of studying that has to 
be done before I think we could go there.
    Chairman Harkin. Mr. Mitchell?
    Mr. Mitchell. Well, a couple of issues. You are right in 
that the bigger get bigger and they buy--but that is limited 
with the payment limitations if they are properly drafted and 
enforced. In other words, that stops that spiral.
    I still do not know how we deal with the environmental 
impact when we put our biggest producers completely out of the 
program. I do not see this Committee having a lot of enthusiasm 
on passing some sort of environmental police that would go out 
on farms that are not in the program to enforce environmental 
requirements. So, you know, there is a bit of a carrot issue 
there, and I do not think you want to enforce a stick.
    Chairman Harkin. Good point.
    Mr. Pucheu. Well, I think it is the same point Ken was 
thinking about, the variability--a farmer with a $200,000 AGI 1 
year is a whole lot different than someone on salary that has a 
$200,000 AGI that might go on year after year. We go up, we go 
down, we are all over the place. We have to make payments on 
land and equipment out of what is left over. It is not just to 
live on. And then your lenders, you know, they like certainty, 
and they do not want the risk of you in and out of the program 
each year because that greatly increases their risk.
    Chairman Harkin. Mr. Hoffman?
    Mr. Hoffman. Variability was going to be my point. I 
remember in 1996 we had a pretty good year, and you are able to 
get ahead for--that 1 year carries you over 5, 6 years. 
Hopefully this is going to be another one of them. It looks 
pretty good coming up here. But that variability could really 
come back to bite a production farmer.
    So, you know, we are looking at expensive equipment, and I 
think it would be hard to set that figure, wherever it be, and 
how would you police it? You take your Schedule F into the FSA 
office or, you know, what is the mechanism to control that?
    Chairman Harkin. Good responses. I was just told by staff 
that actually the administration proposal was a 3-year average.
    Good responses. Thank you all very much.
    Let's turn to our third panel: Mr. Evan Hayes, Mr. Dale 
Murden, Mr. Armond Morris, Mr. Lynn Rundle, Mr. John Swanson, 
and Mr. Jim Evans.
    Again, welcome. I thank you for your patience, very much 
so. And as for the previous panels, your statements will be 
made a part of the record in their entirety. We will have 4-
minute statements by each of you, and we will just go down the 
line as before.
    First will be Mr. Evan Hayes, National Barley Growers 
Association. He is President of the National Barley Growers 
Association. Mr. Hayes raises barley and wheat--at 6,000 feet 
elevation? That is pretty high up there--near Soda Springs, 
Idaho.
    Welcome, Mr. Hayes, and please proceed.

 STATEMENT OF EVAN HAYES, NATIONAL BARLEY GROWERS ASSOCIATION, 
                     AMERICAN FALLS, IDAHO

    Mr. Hayes. Thank you very much, Mr. Chairman
    Mr. Chairman and members of the Committee, Senator Crapo 
stepped out, but, of course, I would like to recognize Senator 
Crapo as being from the great State of Idaho and how much we 
appreciate his services on this Committee.
    U.S. agriculture's biggest challenge is the increasing cost 
of production, fueled by rising energy costs, which affect 
everything from our inputs to transportation costs. While many 
farmers have had record-breaking gross incomes this year, I can 
assure you that we had record-breaking expenses as well. And 
while commodity prices are currently high, we must not lose 
sight of the fact that production agriculture has always had 
the ability to overproduce and cause prices to collapse. That 
is why U.S. farmers continue to need a farm bill with an 
adequate safety net.
    NBGA has serious concerns regarding the level of support 
barley receives relative to other crops in the current farm 
program. We believe barley has lost significant competitiveness 
in its traditional growing regions due, in part, to distortions 
in Federal farm program support levels.
    In 2006, barley acreage in the United States was only 3.5 
million acres, a 10-percent decline from 2005, and the lowest 
planted acreage since 1926.
    Last year, Senator Crapo and Senator Conrad--and I want to 
thank them for this request--had the Senate Ag Committee ask 
FAPRI to look at the root cause of the barley acreage decline. 
We wanted to know if the farm bill might be contributing to it. 
According to their findings, marketing loan benefits have 
clearly favored traditional row crops over cereal grains. In 
the Northern Plains, the average annual marketing loan benefits 
the last 5 years were $4 per acre for wheat, $8 for barley, $12 
for soybeans, and $21 for corn. At the national level, the 
combination of marketing loan benefits and market returns can 
help explain the increase in national row crop acreage since 
the early 1990's and the decline in small grain production.
    However, National Barley does support the structure of the 
current farm bill, but we do urge the Committee to adopt 
support levels to make them more equitable among the program 
crops, using an objective method to determine the supports, 
mainly price history.
    Specifically, NBGA supports adjusting barley and other crop 
marketing loan levels upward to 95 percent of the crop's 2000-
2004 Olympic Average of Prices. If this change were adopted, 
barley's loan rate would be set at $2.35 per bushel, and 
farmers would be less likely to have their planting decisions 
influenced by loan rates during periods of low crop prices. 
This would be a marked improvement over barley's current 
marketing loan of $1.85, which is 75 percent of the historical 
base.
    NBGA supports adjusting barley and other crop target prices 
to 130 percent of the crop's 2000-2004 Olympic price. Once 
again, barley's price at 91 percent of this price history is 
one of the lowest program costs. Barley's suggested price would 
be set at $3.21 if the adjustments were made.
    NBGA also supports adjusting barley's direct payment level 
to 42 cents per bushel, or 17 percent of the 2000-2004 Olympic 
Average of Prices. Again, the current 24 cents per bushel 
direct payment that barley receives is among the lowest 
percentage-wise--that is, 10 percent--when compared to price 
history.
    NBGA supports the current level of payment limits and 
structures, including the continuation of the three-entity 
rule. NBGA supports the creation of a permanent disaster 
program, but does not support funding such a program from 
within the Commodity Title.
    I want to once more thank you for the opportunity to 
testify on behalf of National Barley Growers and would respond 
to questions if you would like to ask.
    [The prepared statement of Mr. Hayes can be found on page 
127 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Hayes.
    Now we turn to Mr. Dale Murden. Mr. Murden manages an 
irrigated farm in Willacy and Hidalgo Counties in Deep South 
Texas, where he raises grain sorghum, cotton, corn, citrus, 
sugar, and vegetables. He is testifying today on behalf of the 
National Sorghum Producers.
    You are what we might call a ``diversified farmer,'' Mr. 
Murden. Welcome. Please proceed.

  STATEMENT OF DALE MURDEN, NATIONAL SORGHUM PRODUCERS, MONTE 
                          ALTO, TEXAS

    Mr. Murden. Thank you, and on behalf of the National 
Sorghum Producers, I would like to thank the Chairman and the 
Senate Ag Committee for the opportunity to discuss the farm 
bill and its impact on the sorghum industry.
    As you said, my name is Dale Murden, and I manage and farm 
on irrigated farmland in Willacy and Hidalgo Counties in South 
Texas. We raise grain sorghum, cotton, corn, citrus, sugar, and 
vegetables.
    Last year was a devastating year for producers in the 
Sorghum Belt. Lack of moisture in South Texas prevented me from 
growing grain or cotton. This year we have received more 
moisture, and producers are increasing their grain sorghum 
acreage and are optimistic we will make the crop. Sorghum 
acreages are increasing in the semiarid Sorghum Belt as ethanol 
plants build to access the reasonably priced starch that is 
located in most of the Sorghum Belt. I myself am involved in 
building an ethanol plant with our local cooperative, and the 
starch feedstock would be 95-percent sorghum. The ethanol 
industry is rapidly changing how sorghum is priced by 
increasing the local cash price.
    Sorghum producers are strong supporters of the 2002 farm 
bill because it significantly improves the equitable treatment 
given sorghum producers relative to other feed grains. 
Priorities for the 2007 farm bill are: to maintain guaranteed 
direct payments because they are important in the semiarid 
Sorghum Belt when we do not have a crop; to equalize the 
sorghum loan rate on the county level with other feed grains; 
and to preserve a safety net of LDPs and countercyclical 
payments for commodities, as we all understand the cyclical 
nature of agriculture.
    Our other major priorities are adding water quantity as a 
priority to the Conservation Title. More work needs to be done 
to conserve water in the semiarid Sorghum Belt and having a 
robust Energy Title as the ethanol industry is dramatically 
changing the sorghum industry. We believe that forward sorghum 
makes a great feedstock for the cellulosic industry, as it has 
the capability to produce in every State.
    While we are hoping that commodity prices do not drop to 
loan rate levels again soon, the reality of the farm economy is 
that prices will drop. We need a safety net to help us through 
low prices. Direct payments are very important to growers in 
States that receive less than 21 inches of rain, which is 
almost all of the Sorghum Belt, as we are in the fourth year of 
a drought. If sorghum had to rank farm support payments today, 
direct payments would be most important, as it is a guarantee 
to our credit institutions. Direct payments are the most 
important part of the three legs of the farm safety net tool. 
In the two counties I farm, my cash price is 40 cents above 
corn, yet my sorghum loan rate is below corn. Even with WASDI 
and NAS supporting sorghum prices above corn, my loan rate for 
sorghum dropped and the loan rate for corn increased in 2007 
compared to the 2006 levels.
    Related to the county loan rate issue, 95 percent of the 
U.S. grain sorghum crop loan rate is less than the loan rate of 
corn. As I mentioned, my cash price is sometimes as much as 40 
cents above corn, yet our loan rates are lower than corn. Not 
having an equal loan rate is costing my fellow board members in 
Kansas $15 to $20 an acre, $10 an acre in Nebraska, and $15 to 
$20 an acre in Colorado.
    In the counties that produce 95 percent of the sorghum 
crop, the average sorghum loan rate was 15 cents per bushel 
under corn. In a loan rate situation, this difference costs a 
producer $10 an acre based on a 70-bushel yield. This makes a 
difference in which crop a producer chooses to plant in a loan 
rate environment.
    As you write a new Commodity Title, maintaining equitable 
direct payments, loan rates, and countercyclical rates between 
all crops should be a high priority.
    Once again, I appreciate the Committee's interest in 
sorghum and look forward to working with you and would be happy 
to answer any questions you may have.
    [The prepared statement of Mr. Murden can be found on page 
157 in the appendix.]
    Chairman Harkin. Mr. Murden, thank you very much.
    Now we turn to Mr. Armond Morris. Mr. Armond Morris is a 
peanut producer from Irwin County, Georgia. He is Chairman of 
the Georgia Peanut Commission and is here today representing 
the Southern Peanut Farmers Federation.
    Mr. Morris, welcome to the Committee.

STATEMENT OF ARMOND MORRIS, SOUTHERN PEANUT FARMERS FEDERATION, 
                        OCILLA, GEORGIA

    Mr. Morris. Thank you, Mr. Chairman, and thank you to our 
Honorable Senator from Georgia, Mr. Chambliss. We appreciate 
you all having this hearing and us being invited to testify, 
and to the rest of the Committee that might not be with us 
today, and those that are, and we very much appreciate you all.
    I am a peanut producer from Irwin County, Georgia. I am 
Chairman of the Georgia Peanut Commission. I am here today 
representing the Southern Peanut Farmers Federation. The 
Federation is comprised of the Alabama Peanut Producers 
Association, the Georgia Peanut Commission, the Florida Peanut 
Producers Association, and the Mississippi Peanut Growers 
Association. Our grower organizations represent about 80 
percent of the peanuts grown in the United States.
    As you will recall, our program changed significantly in 
the 2002 farm bill. Peanut growers went from a supply 
management program to a more market-oriented program. The 
support price for peanuts, prior to the 2002 farm bill, was 
$610 per ton. The new marketing loan, established in the 2002 
bill, was $355 per ton, but the effective amount for growers 
was approximately $405 per ton. This was due to a storage and 
handling fee provision paid by the U.S. Department of 
Agriculture through the 2006 crop year.
    Our industry saw incremental growth in the first few years 
of this farm bill, but with the increase in energy costs came 
dramatic changes to the U.S. peanut industry. We saw a 20-
percent national reduction in acres in 2006, and we anticipate 
another 14 percent drop in the 2007 crop year in my home State.
    The University of Georgia's National Center for Peanut 
Competitiveness has determined that our variable costs have 
increased $91.15 per acre for dryland peanuts and $118.52 for 
irrigated peanuts since the writing of the 2002 farm bill. I 
have included two charts from the center that are farm studies 
illustrating the impact of costs on peanut farmers by comparing 
the 2004 crop year to the 2006 crop year.
    I also did my own analysis on my farm and determined that 
costs had risen significantly for me. For example, fertilizer 
increased from $180 per ton in 2002 to $406 per ton in 2007. 
And since this was written a week ago, it has already gone up 
$21 more on fertilizer.
    Diesel fuel rose from 94 cents per gallon to $2.34 per 
gallon. Nitrogen more than doubled in cost during the same time 
period, likewise for ammonium nitrate. I have included these 
cost comparisons as part of my testimony.
    What do American peanut farmers need in this farm bill to 
assure that we maintain a viable peanut industry in the United 
States? Our peanut States held meetings throughout each of our 
States asking a series of related questions. What was evident 
in the surveys was that our price for peanuts was too low for 
growers to continue to plant. What we have seen in 2006 and 
2007 is a trend that will continue without changes in the 
program. We know the marketing loan program can work for 
American peanut producers, but the price has to be a true 
safety net.
    Growers will not plant peanuts for $355. We would like to 
see an increase in the marketing loan rate to $450 per ton, 
increase the target price to $550 per ton, increase the direct 
payment to $40 per ton, establish a loan deadline of June 30th 
with all peanuts forfeited at that point going to non-edible 
use with supervision.
    The current Federal inspection program for peanuts has been 
very successful in protecting consumers and the industry. Since 
peanuts are generally a food ingredient, we support expanding 
the USDA Federal inspection to include peanut manufacturing 
facilities. We also support maintaining payment limits as 
established in the 2002 farm bill.
    The Committee is aware of the difficulty that the peanut 
industry has had with USDA setting the loan repayment rate. We 
encourage the Committee to adopt language using the 
International Trade Commission's formula for establishing the 
posted price of peanuts versus the current USDA methodology.
    We recognize the significant budget constraints this 
Congress must face. We struggled a great deal in trying to 
determine what peanut producers should present to Congress for 
the next farm bill. What was evident from the beginning was a 
rapidly shrinking industry. We could not come here today and 
ask for a program that would ensure the demise of the U.S. 
peanut industry. The prices we have today do not work for a 
viable industry. Without changes, the U.S. peanut industry will 
continue to decline.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Morris can be found on page 
149 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Morris, and 
especially for all the charts you provided us. They are very 
informative, especially the one on the input costs.
    Mr. Morris. Thank you.
    Chairman Harkin. Now we turn to Mr. Lynn Rundle, the CEO of 
21st Century Grain Processing Cooperative, a grower-owned 
cooperative with 410 farmer members in Manhattan, Kansas. Mr. 
Rundle will be testifying today on behalf of the North American 
Millers Association.
    Mr. Rundle, welcome. Please proceed.

 STATEMENT OF LYNN RUNDLE, NORTH AMERICAN MILLERS ASSOCIATION, 
                       MANHATTAN, KANSAS

    Mr. Rundle. Thank you, Senator Harkin. I appreciate the 
opportunity to speak to you today.
    I represent the North American Millers' Association, which 
represents about 95 percent of all the milling capacity in the 
United States. We mill wheat, corn, and oats in our operation 
at 21st Century Grain Processing.
    I would be here today on behalf of the Iowa Association of 
Oat Growers or the Kansas Association of Oat Growers, but just 
like Jed Clampett, they loaded up the truck and moved to 
Saskatoon since the 1996 farm bill. And that is really the 
unique problem of what I want to talk about. We have got a true 
food security issue in the United States as related to oat 
production, particularly--and also to wheat production to some 
degree. We have seen acres decline dramatically over the last 
20 years.
    We planted 18 million acres of oats in 1987 in this 
country. Last year we planted 4 million and only harvested 1.6 
million acres. That puts at risk our ability to provide this 
basic food commodity.
    The U.S. harvested fewer wheat acres in 2006 than it did in 
1898. We have the smallest oat production since President 
Lincoln started the USDA in 1866, and oat acreage continues to 
decline.
    We have a real issue, and we take kind of a unique approach 
to maybe some of the other commodity groups because while I am 
not an oat producer, I am here on behalf of them as well as on 
behalf of the processing industry, both of have moved north of 
the border to Canada. And that is what puts us at risk.
    To put this in perspective, Mr. Harkin, if you took the two 
major corn-producing counties, Sioux County and Kossuth County, 
together they produce about 90 million bushels of corn. And 
that is the same number of bushels we are projected to produce 
in the entire United States this year in oats.
    If you put the corn production in the hands of two counties 
in Kansas, you can imagine what kind of an ethanol issue we 
would have in the future in guaranteeing a ready supply of 
ethanol as well feed to the livestock industry. The bottom line 
is, we have to reduce our reliance on foreign oats.
    In South Sioux City, Nebraska, where we own a mill, we 
import 85 percent of the oats we process there from Canada 
today. My written testimony shows the schematic of what oat 
production has looked like since 1986 and how it has moved 
across the border into Canada. Next year we will produce 94 
million bushels, as I said before, and we are putting the oat 
production and that security risk in the hands of three dryland 
Canadian provinces, just as much as Iowa is a dryland State on 
the corn side. It is not an irrigated crop. It is a dryland 
crop, and so it is really in danger.
    We believe that this has caused a movement of the oat 
milling assets across the border as well. One exception would 
be the plant in St. Ansgar, Iowa, where you are familiar with, 
a new $20 million expansion this year. But we think that has 
been caused primarily by the Federal farm programs. Through the 
yield guarantee and the loan guarantee, we are guaranteeing 
$7.30 returns, net returns on oats, and $90 on corn. So it just 
makes sense. It is basic Farm Economics 101 why farmers are not 
growing oats.
    So we feel like we must change to compete, and it really 
starts with farm programs because those programs do change 
planted acres and production dramatically. A couple cases in 
point. I think the Federal fuel mandate for 2015 is going to 
bring 8.5 million new acres of corn into production to meet 
that demand. That is one. With the stroke of a pen, we totally 
changed the corn production in the United States.
    Another example would be back in 2002, with the stroke of a 
pen we created a new lentil and pea program that has brought in 
a million new acres in the last 5 years. Those million acres, 
if they were devoted to oats, would be 60 million bushels, 
almost the production we had this year on the oats side.
    So what is the solution? And we think it has to do with 
farm programs, and that is, again, we want to reduce reliance 
on foreign oats in this country. We feel we need that to 
stabilize the industry. And so we would suggest, with the 
creative thoughts of your staff and others on the Senate Ag 
Committee, that we create a mixed-use conservation approach 
where you could take some conservation acres today that are in 
the CRP--something like 10 million acres are supposed to come 
out in the next 5 years--that are in Class I to IV land, and 
with those States that have those acres coming out are 
primarily in the northern tier States where oats are a viable 
commodity, have been in the past. So we would suggest that we 
create some kind of a combination program that really incented 
producers to plant some oats in those CRP acres maybe coming 
out and leave those oats--leave 25 percent of them for habitat, 
for recreation and environmental use.
    So those are some solutions, and I appreciate the 
opportunity to visit with you today. Thank you.
    [The prepared statement of Mr. Rundle can be found on page 
178 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Rundle.
    Now we turn to Mr. John Swanson, National Sunflower 
Association. Mr. Swanson has grown sunflowers on his farm near 
Mentor, Minnesota, since 1972. He currently serves on the Board 
of Directors of the National Sunflower Association as the 
representative of the sunflower seed industry and has also 
served on the U.S. Canola Association Board of Directors. He is 
representing both organizations today.
    Mr. Swanson, welcome to the Committee. Please proceed.

  STATEMENT OF JOHN SWANSON, NATIONAL SUNFLOWER ASSOCIATION, 
                       MENTOR, MINNESOTA

    Mr. Swanson. Thank you for this opportunity to share our 
concerns and views with you.
    The sunflower and canola industries have a bright future if 
equity can be put back into our farm policy. Both oils are low 
in saturated fats--one of the ``bad'' fats--and high in 
unsaturated fats--the ``good'' fats. Both have high oleic 
varieties that are stable enough to not require hydrogenation 
to increase shelf life, so they do not contain trans fats--the 
other ``bad'' fat.
    In early 1990's, the sunflower industry decided to develop 
superior oil characteristics--a challenging and very expensive 
process. The industry transformed entirely to NuSun varieties 
this year, which have a balanced fatty acid profile. They are 
ideal for use in applications that require healthier oils with 
higher stability and longer shelf life, and the NuSun varieties 
do not require partial hydrogenation, so they will contain no 
trans fats.
    The FDA trans fat labeling requirement on food products has 
spurred efforts to eliminate trans fats in our diet, and demand 
for NuSun has exploded. A number of major food companies have 
switched their product formulas to include NuSun to avoid trans 
fat. You can walk down the aisle in your grocery store today 
and see the attractive blooming sunflower faces on many of the 
potato chips in the aisle, and they have really supported 
sunflower by the labeling that they have done on this bag.
    The canola industry as well has decided to highlight the 
healthy qualities of canola oil when it successfully petitioned 
the FDA for a Qualified Health Claim, which they got approved 
last fall. The claim is based on the ability of canola oil to 
reduce the risk of coronary heart disease due to its 
unsaturated fat content, and the demand has increased as a 
result. The canola industry is also increasing the number of 
high oleic varieties available in response to the food service 
industry's desire for zero trans fats as city and State 
governments move to ban the use of trans fat in restaurants.
    Canola oil is also an excellent candidate for biodiesel 
production because it has the highest cetane rating and also 
the lowest gel point of any of the biodiesel feedstock. 
Finally, canola and sunflowers are the highest-yielding oil 
crops on a per-acre basis. We could actually show a net energy 
gain of over 100 gallons per acre of net energy on these crops. 
Pretty significant.
    Consumer demand for higher healthy oil promises to increase 
further in the coming years, and an adequate, stable supply of 
sunflower and canola must be provided. However, the increasing 
demand for sunflower and canola oil has not been met with 
increased production of these acres. A major reason is that 
support levels for minor oilseeds under the current farm 
program are discouraging producers from responding to market 
demand. The minor oilseed marketing loan rate of $9.30 per 
hundredweight is only 82 percent of the 2000-2004 Olympic price 
average. Loan rates for competing crops are much higher: the 
soybean loan rate is 95 percent; the corn rate is 92 percent; 
wheat is 86 percent; and the dry edible pea loan rate is 120 
percent. These inequities have contributed to the 47 and 43 
percent respective fall in sunflower and canola acres in recent 
years.
    Sunflower and canola also have anemic target prices. The 
minor oilseed target price of $10.10 per hundredweight is only 
80 cents higher than the $9.30 loan rate. But the direct 
payment is also 80 cents, making the effective target price 
$9.30--identical to the loan rate. This makes it impossible for 
countercyclical payments to be triggered for minor oilseeds.
    Minor oilseeds also have trouble receiving equitable crop 
insurance coverage. Producers are telling us that they are 
unwilling to plant sunflowers or canola, even as prices soar, 
because insurance coverage for competing crops provides a more 
lucrative safety net.
    Together with the Soybean Association, we strongly support 
adjusting loan rates to a minimum of 95 percent of the 2000-
2004 Olympic average of prices or $10.71 per hundred weight for 
minor oilseeds, and a target price to a minimum of 130 percent 
of the same price average, or $14.66 per hundredweight for 
minor oilseeds. It is absolutely critical that these 
adjustments be made to the 2007 farm bill if our industries are 
going to survive and be able to supply the healthy oils the 
food industry and consumers demand.
    Thank you for your consideration of our views.
    [The prepared statement of Mr. Swanson can be found on page 
243 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Swanson.
    Now we will turn to our final witness, who has really had a 
lot of patience today. Mr. Jim Evans, a farmer of dry peas, 
lentils, chickpeas, wheat, and barley near Genessee, Idaho. He 
is Chairman of the USA Dry Pea and Lentil Council.
    Welcome to the Committee, Mr. Evans. Please proceed.

    STATEMENT OF JIM EVANS, USA DRY PEA AND LENTIL COUNCIL, 
                        GENESSEE, IDAHO

    Mr. Evans. Thank you, Mr. Chairman and members of the 
Committee. I am a fourth-generation farmer of dry peas, 
lentils, chickpeas, and wheat and barley near Genessee, Idaho. 
Today I am testifying on behalf of the USA Dry Pea and Lentil 
Council, a national organization representing producers, 
processors, and exporters of dry peas, lentils, and chickpeas 
across the northern tier of the United States.
    Today agriculture is enjoying some of the highest commodity 
prices we have seen in years. The market opportunities to 
whatever commodity I grow make me feel like a farmer in heaven. 
Then I open my fuel, fertilizer, and machinery repair bills, 
and I realize the gap between heaven and hell is getting real 
close.
    Right now I am in the middle of trying to plant my 
chickpeas. I left my tractor today because I believe the 
biggest challenge facing U.S. commodity producers is securing 
an adequate safety net to protect farmers during periods of low 
prices and natural disaster. Right now commodity prices are up, 
but someday prices will drop, and when they do, our farm policy 
must protect our producers from continued subsidized 
competition, high tariffs, phytosanitary barriers, and exchange 
rate manipulation.
    As Congress writes the new farm bill, we ask that it 
include an adequate safety net in the following programs:
    Pulse crops entered the farm program family in 2002. Our 
organization would like to thank the Senate Ag Committee for 
creating the Pulse Marketing and LDP Programs. The program has 
provided a needed safety net for the producers of dry peas, 
lentils, and chickpeas across the northern tier. In the 2007 
farm bill, we would like to be included and treated equally 
with other farm commodities.
    The Marketing Loan/LDP program provides the best safety net 
for U.S. pulse farmers facing dips in the market prices. The 
table below shows the pulse rates set by the law in the 2002 
farm bill. We request to continue the program at the same 
levels in the 2007 farm bill.
    The 2002 farm bill created a marketing loan for small 
chickpeas, but not for large chickpeas. Our organization 
supports the creation of marketing loan assistance for large 
chickpeas in the 2007 farm bill.
    To reduce our dependence on foreign oil, we support a 
strong energy component in the 2007 farm bill. The most 
effective way to reduce our dependence on foreign oil is to 
encourage U.S. farmers to implement a sound energy conservation 
strategy. To encourage energy conservation, we propose the 
creation of a Pulse Energy Conservation Incentive Payment--
PECIP. Dry peas, lentils, and chickpeas are legumes that do not 
require the use of nitrogen fertilizer in their production 
cycle. In fact, university research shows that the production 
of dry peas and lentils and chickpeas provides a 40-pound-per-
acre nitrogen credit for the next crop.
    In addition to conserving energy, pulse crops also fix 
nitrogen in the soil which provides a significant offset to 
greenhouse gas emissions. The program would be delivered as a 
direct payment to producers who plant energy-conserving crops 
like dry peas, lentils, and chickpeas. The payment would be 
based on multiplying the nitrogen credit saved by planting a 
pulse crop, 40 pounds an acre, times the current cost of 
nitrogen--and this was in February--of 38 cents a pound. The 
payment would roughly be $15 for pulse crops with current 
nitrogen prices.
    As Congress works on providing new incentives for the 
creation of biofuels, we ask that equal weight be given to 
providing incentives to producers of produced pulse crops that 
conserve our energy resources.
    Pulse crops are grown in a rotation with wheat and barley 
and minor oilseeds across the northern tier of the United 
States. Each crop in the rotation has a direct payment except 
for our pulse crops. We support the creation of direct payments 
for dry peas, lentils, and chickpeas equal to the direct 
payment of wheat. That current direct payment of wheat is 52 
cents per bushel.
    Our organization supports the creation of a USDA FSA base 
for dry peas and lentils in the 2007 farm bill and in order to 
receive our direct payment. Producers should be allowed to sign 
up at their current vegetable base for their pulse direct 
payments.
    We are also in favor of being included in the 
countercyclical payment. We support the creation of a pulse 
countercyclical program for dry peas and lentils and chickpeas 
equal to 130 percent of loan rates established in the 2002 farm 
bill. Producers need flexibility to respond to market signals. 
Over 90 percent of the chickpeas in the United States are grown 
in Washington, Idaho, Montana, North Dakota, and South Dakota. 
Currently chickpeas are classified as a vegetable crop and are 
not eligible to be planted on program acres. The growers 
producing chickpeas in the northern tier primarily produce 
program crops that are eligible to be planted on farm program 
base crops. The council supports the inclusion of chickpeas, 
large and small, as an eligible crop to be planted on farm 
program base acres in the 2007 farm bill.
    Thank you for your time and allowing me to testify. I will 
be happy to answer any questions--well, maybe not happy.
    [Laughter.]
    [The prepared statement of Mr. Evans can be found on page 
115 in the appendix.]
    Chairman Harkin. Mr. Evans, thank you very much. I thank 
all of you for your testimony.
    Mr. Rundle, I was interested in the figures you had on what 
has happened to oat production in this country. I have kind of 
a two-part question. Obviously, oats is not only a food grain. 
It can be a feedgrain also for livestock. But also oat straw is 
high in cellulose, so if we are looking at cellulose conversion 
for ethanol, it could be a feedstock for ethanol also. I wonder 
if you have thought about that and if you have looked at that 
as an aspect of production of oats.
    The second part of my question is, as I looked at your 
charts--when I was a kid, we grew a lot of oats in Iowa. We do 
not have any oats now. Of course, a lot of that is just because 
of price and corn, that kind of thing; soybeans have come in 
the last 20 years or so. But I wonder how much of that is due 
to climate change. A lot of this is moving north into Canada, 
and I am just wondering if you have any thoughts on that, both 
on the ethanol and then on is it moving north more or less 
because of climate change and they are able to grow more in 
Canada.
    Mr. Rundle. The first thing is on the ethanol. We have not 
looked at the cellulosic properties of oat straw compared to, 
let's say, wheat straw or switchgrass to figure out which one 
of those would be the better. My guess is switchgrass is 
probably the most ideal, but, you know, you have to marry some 
things sometimes to get things done. And there are two 
products. We also produce oat hulls in the oat milling 
industry, and that is another product that maybe could be used 
somehow in the production of bioenergy.
    The other thing I would say is when you look at the 
movement across the border, we believe that has primarily been 
driven by the farm program payments, the loan rate. It just 
does not make sense in the United States to grow oats or wheat 
if you can grow corn. And that is why production is moving to 
the Canadian border. The climate in the northern tier States is 
ideal also for growing oats.
    Chairman Harkin. Well, if your association has any 
information on using oat straw for ethanol, cellulose, that 
type of thing, I would be interested in seeing it, because, 
again, you get a lot of other things out of oats other than 
just the oat straw, obviously, as food and fee.
    Mr. Rundle. Sure.
    Chairman Harkin. Mr. Swanson, I was interested in your 
chart. It looked like the sunflower acreage is down, but canola 
acreage is up.
    Mr. Swanson. Slightly, yes.
    Chairman Harkin. What is that all----
    Mr. Swanson. That is based on the projections this year, or 
are you looking at last year?
    Chairman Harkin. Well, I just looked at your chart.
    Mr. Swanson. The chart from last year, the acres were down 
last year on----
    Chairman Harkin. Well, if you go from, let's say, the high 
point of 1999 or 2001, it looks like sunflower acreage has 
steadily almost declined, and canola declined but has bounced 
back up again.
    Mr. Swanson. Yes, it has come back, and part of that has 
been driven by the better oil quality and biofuels interest. 
There is a huge new plant in North Dakota looking at biofuels, 
biodiesel from canola, and that is really spurring some 
interest in canola.
    Chairman Harkin. And you say canola and sunflower are our 
highest-yielding oil crops on a per acre basis, even more than 
soybeans.
    Mr. Swanson. Yes, because of the oil percentage. You will 
produce about the same amount of grain per acre with either of 
those three crops. Sunflower will have between 45 and 50 
percent oil; canola will have 38 to 42 percent oil; soybean 
will have from 18 to 22 percent oil. So it is just a matter of 
a percentage based on the total production.
    Chairman Harkin. One final question that I have--and that I 
have asked other panels this--has to deal with the dispute 
within the World Trade Organization saying that our current 
restriction on planting of fruits, vegetables, et cetera, on 
base acres affects whether or not we can categorize direct 
payments as green box. So, again, I am just wondering, does 
your organization have a position on the planting flexibility 
issue at all, on whether you should be able to plant vegetables 
or other specialty crops, whatever you want on program acres?
    Mr. Hayes. Senator, we do not have a policy at this point. 
However, I would say, you know, that we would be supportive but 
not at the cost of funding for the current farm programs. In 
other words, what I am saying is that we feel it is necessary 
to generate new monies.
    Chairman Harkin. OK. Mr. Murden?
    Mr. Murden. NSP does not have a policy per se in regards to 
that, but I believe we believe in fair and equitable for all. 
We would not presume to tell them what to do any more than they 
would presume to tell us what to do.
    Chairman Harkin. I did not hear that. Say that again, Mr. 
Murden?
    Mr. Murden. We would not presume to tell them what to do 
any more than they would tell us what to do. We believe in a 
fair and equitable playing field. We do not have a policy per 
se. And as you referred to a while ago, I kind of wear both 
hats, anyway.
    Chairman Harkin. Right. Mr. Morris? r. Morris. The Georgia 
Peanut Commission or the Federation does not have a position on 
the fruits and vegetables there, but we do have a lot of fruits 
and vegetables grown in Georgia, Florida, and Alabama, and 
Mississippi. So definitely we would want to work with them as 
far as being flexible on working with those commodities.
    Chairman Harkin. Mr. Rundle, do you have any position on 
that?
    Mr. Rundle. No. We do not have a position on that. Thanks.
    Chairman Harkin. Mr. Swanson?
    Mr. Swanson. Neither does the sunflower nor canola.
    Chairman Harkin. Mr. Evans? You probably do.
    Mr. Evans. Mr. Chairman, we have opposed the vegetable 
clause since the 1996 farm bill when we got peas and lentils 
excluded from the Fruit and Vegetable Act, and we also tried to 
get chickpeas out in the 2002 farm bill.
    Now, I do realize that, as you go through the farm bill 
process, I understand there is a difference between growing 
fresh vegetables and fresh fruit. But as far as large chickpeas 
are concerned and small chickpeas, we would like to have those 
included in the 2007 farm bill as non-program crops.
    Chairman Harkin. I understand that.
    Senator Chambliss?
    Senator Chambliss. Thank you, Mr. Chairman.
    Let me start with you, Mr. Hayes, and go right down the 
row. We have had some conversation today, some proposals made 
relative to revenue proposals replacing particularly 
countercyclical payments. If you would just tell me what the 
position of your respective commodity is, I would appreciate 
it.
    Mr. Hayes. Mr. Chairman, Mr. Chambliss, we support the 
current countercyclical program that we have under the existing 
farm bill.
    Senator Chambliss. Dale?
    Mr. Murden. In regards to revenue assurance, the devil is 
in the details, and our region has been severely affected by 
drought. You know, regardless of what percentage and level you 
pick, 70 percent of zero is still zero. And so we would just 
look at it very cautiously.
    Mr. Morris. Senator, the revenue payment is you would look 
at--you know, if we had some kind of guaranteed assurance, but 
the countercyclical has worked very well. I think with peanuts, 
if we could get the loan rate to fall to the market, and for 
peanuts, countercyclical is working very well to make up that 
gap there between the target price and whatever the price would 
be there, as peanuts sales out of loans. I would--for peanuts, 
we would like to stick with the countercyclical.
    Senator Chambliss. Mr. Rundle?
    Mr. Rundle. We do not have a position specifically on that 
just because, again, it is a producer issue. What we do say is 
that anything that distorts planting decisions is something 
congress really needs to address.
    Senator Chambliss. Mr. Swanson?
    Mr. Swanson. Well, we have thought the loan rate distorts 
some of the planting decision, and it has been driven by 
bankers for sunflower and canola, and so that has been a 
negative impact to our crops.
    Senator Chambliss. Mr. Evans?
    Mr. Evans. The pulse industry only gets a marketing loan. 
We would like to have the other two legs of the stool because 
our industries kind of get tired of standing on one foot.
    As far as the crop revenue programs, our industry, mandated 
from the 2002 farm bill, is supposed to have a pilot program 
for crop revenue insurance for pulse crops. And to this time, 
they have a pilot program ready to go for five counties in the 
Pacific Northwest, but because we are not traded on a futures 
market, they are having a problem coming up with numbers on how 
to give us some revenue.
    So I would worry about a revenue-based thing if small 
commodities like ours are going to be in a pickle because we 
are not trade on a futures market or something like that.
    Senator Chambliss. Mr. Morris, the peanut program, of 
course, was dramatically reformed in the 2002 farm bill. The 
quota system was eliminated and replaced with a more market-
oriented program, as you addressed. How has the peanut industry 
adjusted to this change? And in hindsight, was it a positive 
move?
    Mr. Morris. Senator, I think it has all been positive. 
There are just some things that needed to be, I would reckon 
you would say, tweaked or particularly loan repayment in the 
new farm bill, it needs to be dictated to the USDA as to how 
that might work as far as resetting the repayment loan, because 
we could--we have lost our exports, we have lost over 200,000 
tons of export market because the loan repayment rate has not 
been set on peanuts like it should have been or like the 
Congress implemented, so to speak, but I think they 
misinterpreted it.
    So we need to kind of follow the world market on peanuts, 
but the program itself has worked very well, and we appreciate 
what Congress did in implementing a new farm bill in the 2002 
farm bill.
    Senator Chambliss. The latest USDA planting projection 
indicates that peanut acres are going to be down a few 
percentage points nationwide. It looks like we are going to 
have a significant decrease in Georgia.
    In your opinion, what will be the effect of the acreage 
decrease in peanuts? And will a significant price increase that 
would most likely result from the decrease in supply allow the 
peanut industry to prosper without adjusting the market loan 
rate target price and direct payment?
    Mr. Morris. Well, I think what is predicted for this year, 
if we make a good crop, then we might have enough to supply the 
needs. But we could very easily have a shortage of peanuts 
because of the fact that peanuts have been--the loan rate has 
been set too high and has not allowed the peanuts to flow into 
the market and allowed the farmers to be able to produce the 
peanuts as needed for the demand.
    So we are concerned, the high cost of production and the 
low price of peanuts is what has driven so that the numbers of 
acres being planted down.
    Senator Chambliss. Mr. Swanson, I cannot let you be here 
without making a comment. I love barbecue and I love sunflower 
seeds, but barbecued sunflower seeds are awful.
    [Laughter.]
    Senator Chambliss. Gentlemen, thank you all very much. we 
look forward to staying in touch and working with you as we go 
through this farm bill.
    Chairman Harkin. Thank you. I just have one other thing I 
would like to cover before you leave, and that was the 
testimony of Mr. Evans. It might apply also to some others. You 
talked about a Pulse Energy Conservation Incentive Payment. It 
is in your testimony. I took it out because I want to follow up 
on that.
    You just talked about how dry peas, lentils, chickpeas, or 
legumes do not require use of nitrogen fertilizer. They fix 
nitrogen. And you talked about a payment based on the fact that 
it offsets greenhouse gases. This is something that has 
intrigued me for a long time, and this applies not just to you 
but it applies to soybeans, peanuts, alfalfa, that fix nitrogen 
in the soil.
    Mr. Evans. Yes. Dry beans, too.
    Chairman Harkin. Soybeans
    Mr. Evans. Soybeans and dry beans.
    Chairman Harkin. Dry beans?
    Mr. Evans. Yes.
    Chairman Harkin. So they all fix nitrogen. So it seems to 
me that this ought to be part of our effort, again, 
environmentally to fix nitrogen in the soil, cut down on 
greenhouse gas emissions, that this ought to be, again, 
something that society would benefit from. So our consumers and 
the others who look at what we are doing in the farm bill and 
wonder where their tax dollars are going might be supportive of 
that and, again, provide some kind of an income source to 
peanut farmers and chickpea farmers and a lot of other people 
that plant things that fix nitrogen. It seems to me that it 
would be a benefit. I do not know if you have any thoughts on 
that, any of you.
    Mr. Morris. Peanuts put nitrogen back into the soil also.
    Chairman Harkin. I know.
    Mr. Morris. We put about 50 pounds of nitrogen per acre 
back into the soil each year, and then we rotate that with 
cotton or corn, or whatever we can get the benefits from that 
nitrogen the next year.
    Mr. Evans. Chairman Harkin, I would just like to comment 
just a little bit more. We are talking maybe--I now the farm 
bill is going to be expensive, and we are having to go to 
different avenues. One of the things that we have is rather 
than actually getting a cash payment would be get a tax 
incentive, is what I was thinking. So, I mean, we are trying to 
think a little bit outside the box on how we can--I mean, if I 
do not have to pay taxes, that is money back in my pocket, and 
it is the same as getting a check.
    Chairman Harkin. I like that idea. I like that a lot. We 
have a number of members of the Finance Chairman on our 
Committee, and----
    Mr. Evans. Can I make one more point?
    Chairman Harkin. Sure.
    Mr. Evans. One other thing is that we are with the peanut 
guys, the dry bean guys, alfalfa, in a genomics pulse--or I 
should say legume genomics initiative with the National 
Research Foundation. And we have a $5 million grant to study 
the genomics of pulse crops. And what I would want to do is--it 
would be imperative that we keep this project going because 
maybe someday there is a possibility that we can take this gene 
that allows legumes to fix nitrogen, to maybe put it into corn 
or put it into wheat or put it into other commodities. Think of 
the drastic savings that we could have if that would happen.
    Chairman Harkin. OK. And you say we are funding that 
through ag research?
    Mr. Evans. National Research. It is the National Research 
funding.
    Chairman Harkin. I am told by my staff that is the National 
Research Initiative.
    Mr. Evans. OK. Excuse me.
    Chairman Harkin. There you go. We will get the proper words 
there. All right. That is worth looking at, worth funding.
    Any other things before we dismiss you all?
    Mr. Morris. Mr. Chairman, I would like to make one comment 
on payment limitations. It bothers us, the peanut farmers from 
the State of Georgia, because of the fact if I lease my 
equipment, I lease my land, all these type things come out 
prior to my adjusted income. But if I buy--if I am trying to 
buy my farm, buy my equipment, and not under the leasing 
program, so to speak, then my payments have to come out of my 
adjusted gross income. And if you have a wife, say, that works 
as a nurse or with a good income level or in some type 
administration with education or whatever, then we feel that we 
would not have enough monies to sustain our farming operations 
falling under the $200,000 level.
    So we propose to you all that if you would consider leaving 
it like it is, or we need to have some changes in that.
    Chairman Harkin. I appreciate that.
    Mr. Rundle?
    Mr. Rundle. I wish Mr. Roberts would have been here. I know 
he had something to get to this afternoon. But I just wanted to 
make a point to Mr. Roberts for the record we know that as he 
is getting a little bit older, he is eating a lot more oatmeal 
in his diet to keep him healthy. We want to make sure that oat 
producers do not end up on the endangered species list, like 
the piping plover and the black-tailed prairie dog in Kansas. 
And I know he would appreciate that if he was here.
    [Laughter.]
    Chairman Harkin. All right. Enough said.
    Thank you very much, all of you. Thanks for your patience. 
Thanks for your testimony. The Committee will be adjourned 
until 2 p.m. on May 1st. Thank you all very much. Safe travels 
home.
    [Whereupon, at 1:48 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                             April 25, 2007



      
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                   DOCUMENTS SUBMITTED FOR THE RECORD

                             April 25, 2007



      
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                         QUESTIONS AND ANSWERS

                             April 25, 2007



      
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