[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
    HEARING TO REVIEW IMPLEMENTATION OF THE FOOD, CONSERVATION, AND
                           ENERGY ACT OF 2008

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                        GENERAL FARM COMMODITIES
                          AND RISK MANAGEMENT

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           JUNE 24, 25, 2009

                               __________

                           Serial No. 111-21


          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov


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                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           ROBERT E. LATTA, Ohio
STEVE KAGEN, Wisconsin               DAVID P. ROE, Tennessee
KURT SCHRADER, Oregon                BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois       GLENN THOMPSON, Pennsylvania
KATHLEEN A. DAHLKEMPER,              BILL CASSIDY, Louisiana
Pennsylvania                         CYNTHIA M. LUMMIS, Wyoming
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                 ______

      Subcommittee on General Farm Commodities and Risk Management

                   LEONARD L. BOSWELL, Iowa, Chairman

JIM MARSHALL, Georgia                JERRY MORAN, Kansas, Ranking 
BRAD ELLSWORTH, Indiana              Minority Member
TIMOTHY J. WALZ, Minnesota           TIMOTHY V. JOHNSON, Illinois
KURT SCHRADER, Oregon                SAM GRAVES, Missouri
STEPHANIE HERSETH SANDLIN, South     STEVE KING, Iowa
Dakota                               K. MICHAEL CONAWAY, Texas
BETSY MARKEY, Colorado               ROBERT E. LATTA, Ohio
LARRY KISSELL, North Carolina        BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi

               Clark Ogilvie, Subcommittee Staff Director

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page

                        Wednesday, June 24, 2009

Boswell, Hon. Leonard L., a Representative in Congress from Iowa, 
  opening statement..............................................     1
    Prepared statement...........................................     2
Moran, Hon. Jerry, a Representative in Congress from Kansas, 
  opening statement..............................................     2
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, prepared statement..................................     3

                               Witnesses

Stallman, Bob, President, American Farm Bureau Federation; Rice 
  and Cattle Producer, Columbus, TX..............................     4
    Prepared statement...........................................     6
Litterer, Ron, Chairman, National Corn Growers Association; Corn, 
  Soybean, and Hog Producer, Greene, IA..........................    10
    Prepared statement...........................................    11
Hardwick, Jon W. ``Jay'', Chairman, National Cotton Council, 
  Newellton, LA..................................................    13
    Prepared statement...........................................    15
Younggren, Erik, Secretary-Treasurer, National Association of 
  Wheat Growers; Member, Board of Directors, Minnesota 
  Association of Wheat Growers; Wheat, Sugar beet, and Soybean 
  Producer, Hallock, MN..........................................    57
    Prepared statement...........................................    58
Johnson, Roger, President, National Farmers Union, Washington, 
  D.C............................................................    61
    Prepared statement...........................................    63

                           Submitted Material

American Soybean Association, submitted statement................    71

                        Thursday, June 25, 2009

Boswell, Hon. Leonard L., a Representative in Congress from Iowa, 
  opening statement..............................................    73
    Prepared statement...........................................    74
Moran, Hon. Jerry, a Representative in Congress from Kansas, 
  opening statement..............................................    74
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, prepared statement..................................    75

                                Witness

Miller, James ``Jim'' W., Under Secretary for Farm and Foreign 
  Agricultural Services, U.S. Department of Agriculture, 
  Washington, D.C................................................    75
    Prepared statement...........................................    78


 HEARING TO REVIEW IMPLEMENTATION OF THE FOOD, CONSERVATION, AND ENERGY
                              ACT OF 2008

                              ----------                              


                        WEDNESDAY, JUNE 24, 2009

                  House of Representatives,
 Subcommittee on General Farm Commodities and Risk 
                                        Management,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Leonard 
L. Boswell [Chairman of the Subcommittee] presiding.
    Members present: Representatives Boswell, Ellsworth, Walz, 
Herseth Sandlin, Markey, Moran, Conaway, and Luetkemeyer.
    Staff present: Claiborn Crain, Scott Kuschmider, Clark 
Ogilvie, James Ryder, Rebekah Solem, Kevin Kramp, Josh Mathis, 
Josh Maxwell, Pelham Straughn, and Jamie Mitchell.

OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE 
                     IN CONGRESS FROM IOWA

    The Chairman Thank you very much, and I want to thank you 
for joining us here today as we take an examination of the 
implementation of the Food, Conservation, and Energy Act, or 
the farm bill, if you will. I would like to give a special 
thanks to our witnesses for testifying before the Committee and 
to offer your insight into the current status of many of the 
new programs executed under the farm bill. A special thanks to 
my fellow Iowan and current Chairman of the National Corn 
Growers Association, Ron, good to have you here. He farms in 
Greene County with his family, and I very much look forward to 
hearing all the witnesses' testimony. Everyone in this room 
knows what a tough process the 2008 Farm Bill was. For me, the 
farm bill is one of the most important pieces of legislation 
Congress works on every 5 years because every man, woman, and 
child in my opinion has a vested interest in agriculture.
    Whether you live in Davis City where my address is in Iowa 
or in the inner city of New York, your life intersects with 
agriculture multiple times a day. I tell folks like our 
colleagues from the inner city there are three things for sure 
that comes from agriculture that everybody is interested in. We 
have the most plentiful, safest, and the least expensive food 
in the world and so we all have an interest in it, and because 
we all participate in the things we do with agriculture, we 
have that. In the 2008 Farm Bill, we expanded many programs 
essential to the safety net for farmers and ranchers and made 
some reforms, and in cases such as the Average Crop Revenue 
program, ACR, created a new tool for producers to manage their 
risk.
    I am very interested to hear from the witnesses today on 
the level of communication between USDA and producers. I know 
there has been some confusion about many of the provisions in 
the farm bill and much information is slowly getting to country 
FSA offices, which often hinders producers in making their best 
informed choice. I would also like to mention that USDA has 
done some things very well. Everything is not run perfectly, 
but I have no doubt that the Secretary and his staff are 
working non-stop on behalf of farmers and ranchers across the 
country. I would just like to end on one point, and I just said 
it again, that we have the safest, most plentiful and 
affordable food in the world, and we hope that the 2008 Farm 
Bill keeps it that way. At this time, I would like to turn it 
over to my good friend and my colleague, Jerry Moran, from 
Kansas for any remarks he would like to make.
    [The prepared statement of Mr. Boswell follows:]

  Prepared Statement of Hon. Leonard L. Boswell, a Representative in 
                           Congress from Iowa

    I would like to thank everyone for joining me here today as we take 
a thorough examination of the implementation of the Food, Conservation, 
and Energy Act of 2008, commonly known as the farm bill. I would like 
to give a special thanks to our witnesses for testifying before the 
Committee and to offer their insight into the current status of many of 
the new programs executed under the farm bill. And a special thanks to 
my fellow Iowan and current Chairman of the National Corn Growers 
Association, Ron Litterer. Ron farms in Greene, Iowa with his family. I 
very much look forward to hearing all the witnesses' testimony.
    Everyone in this room knows what a tough process the 2008 Farm Bill 
was. For me, the farm bill is one of the most important pieces of 
legislation Congress works on every 5 years because every man, woman, 
and child has a vested interested in agriculture. Whether you live in 
Lamoni, Iowa or the inner city of New York your life intersects with 
agriculture multiple times a day.
    In the 2008 Farm Bill we expanded many programs essential to the 
safety net of our farmers and ranchers. We also made modest reforms and 
in cases, such as the Average Crop Revenue Program (ACRE), created a 
new tool for producers to manage their risk.
    I am very interested to hear from the witnesses today on the level 
of communication between USDA and producers. I know there has been much 
confusion about many of the provisions in the farm bill and much of the 
information is slowly getting to county FSA offices which often hinder 
producers making the best informed choice.
    I would also like to mention that USDA has done some things well. 
Everything has not run perfectly but I have no doubt that the 
Secretary, and his staff, is working non-stop on the behalf of farmers 
and ranchers across the country.
    I would just like to end on one point. The United States has the 
safest, most plentiful, and affordable food supply in the world. The 
programs in the 2008 Farm Bill help to keep it that way.
    At this time I would like to turn it over to my good friend and 
colleague, Jerry Moran from Kansas for any opening remarks he would 
like to make.

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

    Mr. Moran. Mr. Chairman, thank you very much, and thank you 
for the courtesy of delaying the Committee meeting for a couple 
of minutes for my arrival. I am pleased that we are having 
these hearings. Obviously, the implementation of the farm bill 
is important. We spent a significant amount of time in this 
Committee in trying to derive a farm bill that is satisfactory 
to the benefit of American agriculture producers. In today's 
environment, economic environment, with a significant increase 
in input costs, with uncertainty about environmental rules and 
regulations, I think our farmers face very significant and 
serious challenges for economic survival, and the farm bill is 
one component in which we can be of help to see that a way of 
life that feeds the world, feeds and clothes the world, is 
maintained.
    I will forego any additional opening statement knowing that 
you and I both need to be at a Subcommittee markup on the 
transportation bill that is important, certainly, to rural 
America and all of agriculture. I thank you for your courtesies 
and I am delighted to be here and look forward to hearing from 
the witnesses.
    The Chairman Thank you. And for the rest of our Members, we 
will follow the normal procedure and hope that is satisfactory. 
The Chairman requests that other Members submit their opening 
statements for the record.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota

    Thank you, Chairman Boswell, and thanks also to the Ranking Member, 
Mr. Moran, for your leadership on this Subcommittee and for your 
calling this week's hearings on Food, Conservation, and Energy Act 
implementation. I am looking forward to hearing both days of witness 
testimony.
    If you are following what is going on up here, implementation of 
this bill hasn't been the first thing on a lot of our minds. However, 
today is a good time to take a moment and review implementation of farm 
policy and examine how it is working for everyday farmers and ranchers 
across the country.
    Tomorrow, we will hear from the Administration on their progress 
with implementation. Today, we will hear from the producer and farm 
groups on what is working, and what isn't.
    We are just over a year removed from enactment of a historic farm 
bill that made significant income eligibility and payment limit reforms 
while preserving the farm safety net. The Act required the 
Administration to amend previous policies by replacing the three-entity 
rule with direct attribution, and placing hard caps on both on- and 
off-farm income.
    The timing of farm bill implementation was difficult in some 
respects, in part to the change of Administrations, and the new team at 
USDA having to deal with rulemaking that was inconsistent with 
Congressional intent. And, like all incoming Administrations, the new 
group was understaffed from the start. But USDA, in my opinion, has 
made a worthy effort to implement a very complex set of policies and 
programs developed by the bill.
    Unfortunately, delayed rulemaking can cause uncertainty in the 
countryside, and today's witnesses can help us find out what's on the 
mind of farm country when it comes to implementation. I know, for 
example, there has not been any movement on rules for the new disaster 
program, and with input costs and weather uncertainty as high as ever, 
farmers and ranchers need to know that this program will be up and 
running should they need it.
    I also know the groups today have had issues dealing with confusing 
rules on payment eligibility and the definition of ``actively 
engaged''; issues that were held over from the last Administration. 
There have also been things that we've already had to fix, like the 
misinterpretation of the base acre provision.
    I share one major concern of the producer groups: trying to 
implement a new farm bill with one of the most out-of-date computer 
systems in the Federal Government. This has been a big issue with this 
Committee for quite some time, but I hope our witnesses today can help 
send a message on what it would mean for the delivery of programs and 
for our producers if we don't modernize the system.
    I know the groups here today are strong supporters of our farm 
policy and support timely implementation of its provisions. I hope you 
all can help us understand what is working and what isn't. Some of the 
problems you guys face are obvious to the Committee, while some may not 
be so obvious, so whatever light you can shed on the process so far 
would be helpful to us.
    Thank you again, Chairman Boswell, for calling this hearing today. 
I yield back.

    The Chairman Again, welcome to the panel, and I just 
recognize all of you from the different areas you represent and 
we have great representation, so I appreciate having you here. 
Again, President Stallman from the American Farm Bureau, thank 
you for being here and your hard work with us, Ron Litterer, 
which I have just recognized a moment ago, a corn, soybean, and 
hog producer, and Chairman of the National Corn Growers 
Association, Jay Hardwick, Chairman of the National Cotton 
Council from Newellton, Louisiana, Mr. Erik Younggren, a wheat, 
sugar beet, and soybean producer and Secretary-Treasurer of the 
National Association of Wheat Growers from Minnesota, and Mr. 
Roger Johnson, President, National Farmers Union, Washington, 
D.C. Thank you for being here. I think we will start off with 
you, Mr. Stallman, and we will go through each one of them. We 
will have our Q&A time, and we are looking forward to what you 
all have to share with us. Mr. Stallman.

  STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU 
       FEDERATION; RICE AND CATTLE PRODUCER, COLUMBUS, TX

    Mr. Stallman. Thank you, Mr. Chairman, Ranking Member 
Moran, Members of the Committee. I am President of the American 
Farm Bureau Federation and a rice and cattle producer from 
Columbus, Texas. The Farm Bureau is the Nation's largest 
general farm organization representing producers of every 
commodity in every state of the Nation. We greatly appreciate 
this invitation to speak to the Subcommittee this morning. The 
political climate and timing of the passage of the 2008 Farm 
Bill created several challenges for implementation. The bill 
passed with strong opposition from the previous Administration 
as their tenure grew to a close. USDA in the beginning weeks of 
the Obama Administration could best be described as 
understaffed and overworked. Movement on many farm bill rules 
slowed to a crawl. The result was a great deal of uncertainty 
in the countryside during the 2009 planting season.
    Before I express some of our concerns, I would like to 
point out some farm bill implementation successes. First, we 
saw the Obama Administration immediately grant a much needed 
extension to the comment period for the payment eligibility 
rule. Secretary Vilsack and his staff also worked to change a 
provision in the ACRE rule that removed the base from Federal 
lands. This provision yanked the safety net out from under some 
farmers making it impossible for them to get production loans 
to continue to farm and conserve Federal land. Producers and 
wildlife habitat would have suffered had this rule not been 
reversed. Despite these positive developments, our farmers have 
expressed numerous frustrations with the implementation 
process.
    One of the most common questions we get is when will 
disaster program money be available? For a year now the answer 
has been we don't know. We don't have rules yet. It is not an 
answer that is well received by farmers who have seen their 
operations devastated by natural disaster. For this reason, we 
have urged USDA to work diligently to implement the program as 
quickly as possible. Even after rules for the disaster program 
were finalized, USDA will face technological challenges in 
rolling it out. USDA runs one of the most antiquated computer 
systems in all of the Federal Government. The limitations of 
this older technology could be an enormous hurdle to 
implementing increasingly complex farm programs. The Farm 
Bureau has consistently requested additional funding for FSA IT 
needs, but to date USDA has only been appropriated a small 
fraction of the IT money required.
    We urge the Agriculture Committee to work with USDA and the 
Appropriations Committee to secure this necessary funding. 
Another farm bill implementation issue that we are watching 
closely is the announced collaboration between the IRS and 
USDA. While the Farm Bureau is concerned about this 
collaboration, we are reserving judgment until further details 
are known. If handled correctly, this collaboration could 
provide producers with an alternative to providing annual 
confidential business information to local FSA offices. While 
farmers and ranchers greatly respect the work done by FSA 
staff, local FSA offices simply are not equipped to handle 
confidential information. As USDA moves forward with this 
collaboration, we have urged the Department to consider several 
points.
    First, confidentiality is paramount. It is also important 
that follow-up audits be handled at a centralized FSA location 
by trained experts. The timing of audits will be critical and 
the Farm Bureau opposes any time line that would delay farm 
program payments. The final concern that we would like to 
discuss is the change to the definition of actively engaged for 
purposes of determining farm program eligibility. This change 
impacts every farm, no matter the size, no matter the crop, and 
no matter the region. One of the most glaring problems with the 
new actively engaged rule is that it discriminates against 
family farms that are organized as corporations. While there is 
an abundance of rhetoric in opposition to corporate agriculture 
and in support of family farms, what is often overlooked is 
that they can be one and the same.
    The corporate business structure is the logical choice for 
limiting liability, and in some states there can be some 
significant tax benefits to organizing a farm business as a 
corporation. Organizing a farm as a corporation does not make 
it any less of a family business. To give you an idea of 
exactly how this change could negatively impact the family farm 
operation, let me walk you through a scenario. The new actively 
engaged rules demand that every shareholder in a farm 
corporation prove that they are actively engaged in 
agriculture, or they will have part of the safety net stripped 
from under them. Let us say that you operate a farm with your 
two brothers and you have chosen to organize your family farm 
as a corporation. You have a son that would like to farm with 
you but first he would like to go to college. You have known 
for some time that your son wants to farm with you so you have 
been gifting him small shares of the corporation.
    Your son now owns ten percent of the shares of the 
corporation. He is 18. He is moving away from the farm to go to 
college and earn a degree in ag business. But when he is away 
at school, his participation in the daily activities on the 
farm are hindered to a degree that he cannot prove his 
contributions are separate, distinct, documentable, 
identifiable, and commensurate with his share of ownership, and 
he is deemed not to be actively engaged. Your family farm is 
looking to lose ten percent of its safety net just because you 
want to pass the farm on to your son and that son wants to go 
to college. We urge USDA to reconsider changes such as this in 
the payment eligibility rule.
    In conclusion, we appreciate the hard work of this 
Committee and USDA to implement the farm safety net, and we 
look forward to working with you to ensure that the best 
interests of farmers are paramount during this implementation 
process. Thank you again for the opportunity to speak, and I 
look forward to questions.
    [The prepared statement of Mr. Stallman follows:]

  Prepared Statement of Bob Stallman, President, American Farm Bureau 
           Federation; Rice and Cattle Producer, Columbus, TX

    My name is Bob Stallman. I am President of the American Farm Bureau 
Federation and a rice and cattle producer from Columbus, Texas. I 
appreciate the invitation to speak to the Subcommittee this afternoon. 
Farm Bureau is the nation's largest general farm organization, 
representing producers of every commodity, in every state of the nation 
as well as Puerto Rico, with more than six million member families.
    I would like to thank Subcommittee Chairman Boswell and Ranking 
Member Moran for holding this hearing. The farm bill touches the lives 
of every producer in this country. It was a long, hard road to passage 
of the 2008 Farm Bill, and thanks to the hard work of this Committee, 
the end product was a fiscally responsible compromise of which we can 
all be proud. However, the work does not end with the passage of 
legislation, but continues and often becomes more difficult as that 
legislation is implemented.
    The political climate and timing of the passage of the 2008 Farm 
Bill created several challenges for implementation. The bill passed as 
the tenure of the former Administration was drawing to a close. The 
Administration was tasked with implementing the bill during their final 
days in office, and the unfortunate result was in some instances rules 
that are inconsistent with Congressional intent. Examples of this 
include the definition of actively engaged, the 10 acre provision and 
the elimination of base from Federal lands.
    One of the most important and controversial rules, the rule on 
payment eligibility, was published in the Federal Register on December 
26, 2008. It was not a welcomed Christmas gift in the countryside. The 
late date left the incoming Obama Administration with very little time 
or opportunity for change before the rule would have to be implemented.
    As with all new Administrations, USDA in the beginning weeks of the 
new Administration was understaffed and overworked. Movement on farm 
bill implementation rules came to a halt. While USDA is clearly now 
making progress on these rules, the delays have left a great deal of 
uncertainty in the countryside during this planting season.
    Planning for your business is always difficult, but the uncertainty 
of the rules and the current economic turbulence has made applying for 
operating loans even more challenging.
Implementation Successes
    Before I focus on specific concerns, I would like to take a moment 
to point out some of the farm bill implementation successes. Once the 
farm bill was passed, the USDA did an excellent job of getting checks 
out to farmers as quickly as possible. Given that 2008 was a year of 
historically high input costs, this meant a great deal to our 
producers.
    The Obama Administration immediately moved to correct several 
concerns we had with the way farm bill implementation had been 
proceeding.

   Secretary Vilsack quickly granted an extension to the 
        comment period for the payment eligibility rule that was 
        promulgated in the final days of the previous Administration. 
        This extension was requested by several of the groups 
        testifying today. The extension allowed us time to evaluate a 
        very complex rule and to determine the possible impacts on farm 
        operations.

   Secretary Vilsack and his staff also worked to change a 
        provision in the ACRE rule released in December 2008 that 
        removed the base from Federal lands. This elimination of base 
        was not required by statute, but was interjected in the form of 
        a rule. In some parts of the country, farmers produce crops on 
        lands owned by the Fish and Wildlife Service, the Army Corps of 
        Engineers and other Federal agencies. In exchange for use of 
        the land, farmers typically agree to leave part of their crop 
        in the field for wildlife feed and habitat. This arrangement 
        was a win for conservationists and farmers alike. However, the 
        ACRE rule in its original form removed the farm safety net from 
        these farmers, making it impossible for them to get production 
        loans to continue to farm. Producers and wildlife habitat both 
        would have suffered had Secretary Vilsack not reversed the 
        rule.

   Finally, Secretary Vilsack brought a small degree of 
        resolution to the way the 10 acre provision of the farm bill 
        was being implemented. This provision prohibits any producer 
        with 10 or fewer base acres from receiving a direct, 
        countercyclical or ACRE payment. The manager's statement that 
        accompanied the farm bill made it clear that Congressional 
        intent was for producers to be able to aggregate their base 
        acres to get above this 10 acre threshold. However, the 
        original interpretation of this provision did not allow 
        aggregation, and prohibited legitimate reconstitutions of 
        parcels. The result was more than 460,000 farms were deemed to 
        be no longer eligible for the farm safety net. While farmers 
        are still not allowed to aggregate their base acres to get 
        above the threshold, the reconstitution rules have be restored 
        so that some producers have been allowed back into farm 
        programs.
Implementation Concerns
    Despite these positive developments, farmers also have had numerous 
frustrations with the implementation of the farm bill. As a general 
agriculture organization that represents the interests of all types of 
producers from all regions of the country, I would like to mention on a 
few of the hurdles that we face in order to make the 2008 Farm Bill one 
that works for the farmers it's designed to protect.
Disaster Assistance
    One of the most common questions we get from farmers concerns the 
delivery of disaster program assistance. For over a year, we have been 
unable to answer that question since the rules have not been published. 
Many farmers faced major disasters in 2008. It was a year of late-
season flooding and crop destruction from hurricanes on the Gulf Coast, 
early season levy-breaks in the Midwest, devastating spring freezes in 
the Northeast, and extreme drought in the Carolinas, Georgia and Texas.
    One of the expressed goals of the farm bill's supplemental disaster 
package is to provide farmers with more timely, consistent assistance 
when they face devastating natural disasters. Ad hoc disaster dollars 
are difficult to secure, and the farm bill provided an opportunity to 
streamline disaster assistance programs and ensure funding. Yet, a year 
after the passage of the farm bill, there are no rules for the disaster 
program, let alone a target date for when producers will receive 
assistance under these programs.
    For farmers who are facing tightening credit markets and are 
already stretched by high input costs combined with this year's lower 
commodity market prices, the disaster program could provide meaningful 
assistance. We urge USDA to work to implement the program as quickly as 
possible.
Information Technology
    Even after the rules for the disaster program are finalized, we 
understand that USDA will face technological challenges in cutting 
checks for farmers who have been devastated by natural disaster. USDA, 
and more specifically, FSA, runs on one of the most antiquated computer 
systems in the Federal Government.
    The limitations of this older technology create enormous hurdles to 
implementing the complex provisions of the farm bill, such as the 
disaster package, and results in inefficiencies throughout the 
department. It is unclear how long the antiquated system can continue 
to support increasingly complex farm programs. Systems across agencies 
under USDA jurisdiction cannot communicate with each other, which could 
lead to improper payments and duplicate paperwork. Upgrading FSA 
computer technology now will lead to greater efficiencies and could 
prevent a future system failure.
    USDA has stated that they need approximately $300 million for 
technology upgrades to ensure a smooth and reliable implementation of 
farm bill programs and Farm Bureau supports additional funding for 
FSA's technology needs. We urge the Agriculture Committee to work with 
USDA and the Appropriations Committee to secure the necessary funding.
USDA Collaboration With IRS
    Another farm bill implementation issue that we are watching is the 
collaboration between the IRS and USDA that was announced by Secretary 
Vilsack in March. While Farm Bureau is concerned about this 
collaboration, we are reserving judgment until further details are 
known. Farm Bureau is extremely sensitive to producer privacy concerns, 
but if this is handled correctly, it could provide producers a more 
secure and private alternative to providing annual confidential 
business information and tax documentation to local FSA offices and 
county committees.
    We are concerned most FSA offices do not have adequate storage nor 
the security to ensure the safety of information that could be used to 
commit identity theft and fraud. Additionally, the business nature of 
information could create a conflict of interest for FSA employees at 
the local office. In many small towns, agriculture is the backbone of 
the community. It would not be unusual for the local FSA employee to 
have relational ties to other farmers or agribusinesses in the area. 
While farmers and ranchers greatly respect the work done by FSA staff, 
providing highly sensitive and confidential documents such as IRS forms 
to local offices is not prudent. Centralizing this function and 
cooperating with IRS for payment eligibility purposes could be 
acceptable, but the devil will be in the details.
    Our understanding of the proposal is that USDA will provide the IRS 
with a set of income criteria, and the IRS will use this criteria to 
``red-flag'' certain producers who could exceed the Adjusted Gross 
Income (AGI) limits. USDA will then request additional information from 
``red-flagged'' producers and conduct an audit.
    As USDA moves forward, we have urged the department to consider 
several concerns. First, confidentiality is paramount. Any proposal 
that allows any IRS information to become public through the Freedom of 
Information Act (FOIA) is unacceptable to Farm Bureau and its members. 
The ability of an organization or private citizen to obtain the list of 
producers who have been red-flagged by the IRS would be very 
problematic. There are numerous people and organizations who do not 
understand the farm safety net and oppose these programs outright. To 
give these people a list by which to further their political goals is 
unacceptable. The assumption would be made that these farm program 
recipients are guilty of exceeding the limit regardless of whether they 
are later proven innocent and could do irreparable damage to producers' 
reputations and to the reputation of farm programs. It is critical that 
no information obtained by USDA through the IRS be subject to FOIA 
rules.
    It is also important that once producers are red-flagged by the IRS 
any additional investigation required be handled at a centralized FSA 
office. If this information is going to be delegated to local FSA 
offices, then all of Farm Bureau's aforementioned concerns about 
confidentiality, storage and employee conflicts of interest apply. It's 
important that trained experts conduct the follow-up audits on 
producers. The IRS and 2008 Farm Bill definitions of on-farm income are 
not identical. It is critical that FSA employees entrusted with 
gathering additional information about producer eligibility have 
adequate training in accounting to make the proper judgment. The timing 
of audits will also be important. Producers should not be assumed 
guilty until proven innocent, and Farm Bureau opposes any timeline for 
audits that would delay critical farm program payments.
    The standards used to red flag producers also will be pivotal. The 
goal of this joint arrangement should not be to audit thousands of 
producers every year. USDA has neither the time nor resources for such 
an effort, and given the other safeguards in place, such a system of 
audits would be wasteful and unnecessary. A criteria should be 
developed that identifies a manageable number of producers who come 
closest to exceeding the requirements.
Actively Engaged
    Our final concern deals with changes to the definition of 
``actively engaged'' for purposes of determining farm program 
eligibility. Our concerns are similar to those raised by other 
organizations, and our members felt strongly enough about this issue 
that our delegate body voted last year to include language in our 
policy book declaring that no changes should be made to the definition 
of actively engaged. This issue, along with the payment eligibility 
issues, are often incorrectly associated only with Southern 
agriculture. Yet, the first call Farm Bureau received expressing 
concern about the payment eligibility rule came from the State of 
Montana. The second call was from Illinois. The changes in this rule 
impact every farm, no matter the size, crop or region.
    The proposed changes to the definition of actively engaged hurt 
farmers and create uncertainty across the countryside. Under the old 
rules, producers had to meet a two-pronged test: they had to show that 
they contributed capital, land and/or equipment, and they contributed 
labor and/or management to the operation. The new rule takes the labor 
and management requirement to an entirely new level by further 
mandating that this management be ``separate and distinct'' and 
``identifiable and documentable,'' but provides no clarification as to 
what this means. At a minimum, this lack of clarity will almost 
certainly result in a multitude of standards being applied across the 
country.
    These changes also fly in the face of common business sense. As 
with any business, numerous stakeholders could have input into key 
decisions, but roles may overlap or change as needed. In an operation 
consisting of four brothers, it is quite possible that decisions are 
made by the group, making ``separate and distinct'' an illogical 
standard to apply. Fundamental business principles may prevent every 
decision from being ``documentable.'' It is not prudent or practical to 
have a multitude of stakeholders with signature authority on payroll, 
marketing or purchasing accounts, yet this seems to be what the new 
rule implies should be done in order to ensure that everyone's 
contribution is ``documentable.''
    The new actively engaged rule also appears to discriminate against 
family farms that are organized as corporations. While there is an 
abundance of rhetoric in opposition to ``corporate agriculture'' and in 
support of ``family farms,'' what is often overlooked is that they can 
be one and the same. Farms are a high-risk business where liability can 
be an enormous concern. A corporate business structure is the logical 
choice for limiting liability. In some states there can be significant 
tax benefits to organizing a farm business as a corporation. Often 
farmers will use the corporate structure for estate planning purposes. 
Organizing a farm as a corporation does not make it any less of a 
family business, it does not make the safety net less important to the 
operation, and it does not mean that the operation is large or wealthy. 
It simply means that corporation status provides a business benefit to 
the family farm, which should not be penalized for making the logical 
and prudent business decision.
    To give you an idea of how this change could negatively impact a 
family farm, let me walk you through a scenario. The actively engaged 
rules demand that every ``shareholder'' in a farm corporation prove 
that they are actively engaged in agriculture or risk having part of 
the safety net stripped from under them. Let's say that you operate a 
farm with two family members, and have chosen to organize your family 
farm as a corporation. One of your children would like to farm with 
you, but first, would like to go to college. You've known for some time 
that your child, I'll use ``son'' for this example, wants to farm with 
you, so you've been gifting small shares of the corporation to him for 
a few years. He now owns ten percent of the shares of the corporation. 
At 18, he moves away from the farm to go to college to earn a degree in 
agriculture business. But while away at school, his participation in 
the daily activities on the farm is hindered to a degree that he cannot 
prove his contributions are separate, distinct, documentable, 
identifiable and commensurate with his share of ownership--and he is 
deemed to be not actively engaged. Your family farm will lose up to ten 
percent of its safety net just because you want to pass the farm on to 
your child, who wants to go to college. Not only does this rule seem to 
contradict the ideal of passing farms down through the generations, but 
it can create a perverse incentive to discourage our children who want 
to be a part of the farm from continuing their education. Under this 
rule, farmers who would like to see their children take over the 
operation will be forced to choose between prudent estate planning and 
maintaining the farm safety net for their operation.
    We have urged USDA to reconsider changes to the payment eligibility 
rule. While farmers will have to live with the new definition of 
actively engaged for 2009, we hope that more logical rules will prevail 
in 2010 and beyond.
    In conclusion, we appreciate the hard work of this Committee and 
USDA to implement the farm safety net that is critical to America's 
farmers and ranchers. The 2008 Farm Bill was a hard-fought balance of 
interests that made meaningful reforms to farm programs and did so in a 
fiscally responsible manner. The bill works for America's farmers so 
that they can continue to provide the safest, most abundant and least 
expensive food supply in the world to American consumers.
    However, the implementation process can be long and arduous, and we 
still have several challenges ahead. We look forward to working with 
both the Agriculture Committee and the Department of Agriculture to 
ensure that the best interests of farmers are of paramount importance 
during this implementation process.
    I would like to thank you again for the opportunity to speak this 
morning, and I am happy to answer any questions you might have.

    The Chairman Thank you, President Stallman. Mr. Litterer, 
please.

  STATEMENT OF RON LITTERER, CHAIRMAN, NATIONAL CORN GROWERS 
              ASSOCIATION; CORN, SOYBEAN, AND HOG
                      PRODUCER, GREENE, IA

    Mr. Litterer. Good morning, Chairman Boswell, Ranking 
Member Moran, and Members of the Subcommittee, on behalf of the 
National Corn Growers Association, I thank you for this 
opportunity to discuss our members' views regarding 
implementation of the Food Conservation and Energy Act of 2008. 
I am pleased to add that the American Soybean Association has 
asked to be identified as supporting our statement today. 
First, I want to state that NCGA very much appreciates the 
Subcommittee's steadfast support of the corn industry. We also 
recognize your ongoing work. Exercising your oversight 
authority can go a long way toward ensuring an effective 
implementation of the 2008 Farm Bill. One of the signature 
reforms of the 2008 Farm Bill was the adoption of a revenue-
based risk management program. This new farm safety net option, 
the Average Crop Revenue Election or ACRE represents a 
fundamental change in commodity programs.
    In contrast to programs linked to set target prices and 
loan rates producers can now assess a new risk management tool 
that is tied to rolling market season average prices and state 
crop yields. ACRE is designed to deliver assistance when a 
farmer experiences a real loss in crop specific revenue. If 
properly implemented, ACRE can provide far more effective 
protection against volatile markets and production shortfalls 
not adequately addressed by crop insurance or disaster 
assistance. NCGA acknowledges this safety net option like any 
new program presents real administrative challenges for the 
Farm Service Agency. Complicating the task was the prior 
Administration's opposition to ACRE and resistance to 
expediting the rulemaking.
    Despite multiple regulatory changes to the direct and 
countercyclical and ACRE programs, plans to move forward with 
national field training for FSA offices were brought to a halt. 
FSA offices were left with too many unanswered questions 
resulting in considerable confusion. Consequently, we were very 
pleased by Secretary Vilsack's decision to extend the sign-up 
period for DCP and ACRE until August 14. It was welcome news 
for producers who were short of time to adequately evaluate 
ACRE. Extension of the sign-up period also provided additional 
time for the FSA staff to develop additional information 
resources, as well as the handbook of enrollment procedures. To 
be sure, FSA staff has worked very hard to develop the software 
and online resources to help launch the program as quickly as 
possible. NCGA was disappointed though by the Department's 
decision not to proceed with field training that would have 
ensured a better exchange of information between FSA national, 
state and county employees on important questions regarding 
improving crop yields and landowner approvals.
    Our informal surveys indicate that many FSA offices remain 
ill equipped to adequately explain the ACRE program. With an 
estimated 600,000 of potential 1.8 million direct 
countercyclical program and ACRE program contracts yet to be 
approved getting the producer enrollment and yield 
certifications completed by August 14 deadline presents an 
increasingly probability of workload issues for local FSA 
offices. Given the ACRE enrollment period has actually been 
open only since April 27, and growers have been encouraged by 
some economists to delay their decision, we have been urging 
USDA to raise a much greater awareness of this new risk 
management tool. We were pleased to learn yesterday the FSA is 
launching an educational campaign to better inform producers 
about the potential benefits of the ACRE program.
    Another top priority for NCGA and ASA concerns the long 
delayed implementation of much needed changes to the On-Farm 
Storage Facility Loan Program. Two of the most important 
enhancements are the increase in the maximum loan limit to 
500,000 from 100,000 and an extension of the maximum loan term 
from 7 to 12 years. Congress included these provisions in the 
2008 Farm Bill with the intent of providing reasonably priced 
credit to help producers meet their increasing storage needs 
that are growing in part because trend line yields of crops 
such as soybeans and corn are increasing. However, many 
producers have been waiting for the final rules to be issued so 
they can apply for assistance under this program. With the new 
rules expected to be published no earlier than the middle of 
July most builders will be extremely pressed for time to 
complete these projects by fall harvest.
    FSA announced at public meetings in both Ohio and Kansas in 
early April that the agency would be making available soon in 
their county offices a list of documentation that would be 
required to apply for the loan. Earlier distribution of this 
information would at least allow producers to begin gathering 
information and submitting applications for processing ahead of 
the rulemaking being finalized. I must emphasize that on-farm 
storage is very important to a farm operation's ability to 
successfully manage marketing of grain. Mr. Chairman, I want to 
thank you for this opportunity to appear before your 
Subcommittee and discuss NCGA's concerns regarding the 
implementation and progress of our two very important farm 
programs. We appreciate your consideration and look forward to 
working with you and your colleagues in the weeks and months 
ahead to help resolve these issues. Thank you.
    [The prepared statement of Mr. Litterer follows:]

  Prepared Statement of Ron Litterer, Chairman, National Corn Growers
        Association; Corn, Soybean, and Hog Producer, Greene, IA

    Mr. Chairman, Ranking Member Moran and Members of the Subcommittee, 
on behalf of the National Corn Growers Association (NCGA), I thank you 
for this opportunity to share you with our members' observations and 
views regarding implementation of the Food, Conservation, and Energy 
Act of 2008. I am pleased to add that the American Soybean Association 
(ASA) has asked to be identified as supporting our statement today.
    My name is Ron Litterer, currently serving as Chairman of NCGA. I 
am from Greene, Iowa where my wife and I raise corn, soybeans and hogs.
    The National Corn Growers Associations represents more than 35,000 
corn farmers from 48 states. NCGA also represents more than 300,000 
farmers who contribute to corn check off programs and 26 affiliated 
state corn organizations across the nation for the purpose of creating 
new opportunities and markets for corn growers.
    First, I want to state that NCGA very much appreciates this 
Subcommittee's steadfast support of the corn industry and your 
commitment to the passage and enactment of an adequately funded, well 
balanced and reform minded farm bill. We also recognize that the 
ongoing work by you and your staff in exercising your oversight 
authority can go a long way toward ensuring the Department of 
Agriculture meets its responsibilities in implementing the 2008 Farm 
Bill as intended by Congress.
    One of the signature reforms in the 2008 Farm Bill long advocated 
by NCGA and ASA was the adoption of a revenue based risk management 
program that adjusts with annual changes in market prices and crop 
yields. This new option in the farm safety net, the Average Crop 
Revenue Election (ACRE), represents a fundamental change in U.S. 
commodity programs by reducing market distortions in planting 
decisions, cutting direct payments and lowering loan deficiency 
payments. In contrast to current programs that are linked to set target 
prices and loan rates, producers now have an opportunity to access a 
new risk management program that will vary with actual rolling market 
season average prices and state crop yields. Equally important, ACRE is 
designed to deliver assistance when a real loss in crop specific 
revenue is sustained on the farm. It is our view that ACRE, if properly 
implemented, can provide far more effective protection against volatile 
markets and production shortfalls not adequately addressed by either 
Federal crop insurance or the new disaster assistance program.
    Because of ACRE's relative complexity compared to other programs 
and the inherent difficulty of introducing a significant reform along 
with other changes to the farm bill, NCGA acknowledges that this new 
option presents some real administrative challenges for the Farm 
Service Agency. Further complicating the task was the prior 
Administration's opposition to ACRE and its resistance to expedite the 
rule making as called for in the farm bill. Despite the multiple policy 
and regulatory changes called for in the Direct and Countercyclical (or 
DCP) and ACRE Program, plans to move forward with national field 
training for the state and county FSA offices and a roll out of program 
enrollment procedures were brought to a halt. By deferring key 
decisions on policy and planning to the new Administration, Farm 
Service Agency personnel in our county offices were left with too many 
unanswered questions and information gaps resulting in considerable 
confusion and in some cases, inaccuracies on how ACRE actually 
functions.
    Consequently, we were very pleased by Secretary Vilsack's decision 
to extend the sign up period for the DCP as well as ACRE until August 
14th. Given the delays in planting throughout much of the corn belt, it 
was welcome news for producers who were short on time to provide the 
required documents for the enrollment process and to adequately 
evaluate the ACRE program for their farm operations. Extension of the 
sign up period also provided additional time for the FSA to develop 
some additional information resources as well as the handbook of 
enrollment procedures for state and county offices. To be sure, the FSA 
staff has worked very hard to develop the software and on line 
resources to help launch the program as quickly as possible. NCGA was 
disappointed, though, by the Department's decision not to proceed with 
a scheduled national field training program that would have ensured a 
better exchange of information between FSA national staff and state 
employees on important questions of enrollment procedures, records for 
proving crop yields, landowner approvals and alternative learning 
resources for evaluating the ACRE program.
    As an alternative to continuing with the countercyclical program, 
participation in ACRE does not come without trade-offs, including a 20 
percent reduction in direct payments and a 30 percent reduction in the 
marketing loan rate. Informal surveys by our growers and other reports 
indicate that many FSA offices remain ill equipped and not properly 
trained to adequately explain the ACRE program to producers inquiring 
about their options. Some county offices have relied on the Extension 
Service to assist producers with evaluating ACRE, but these efforts can 
vary widely from one office to another.
    With an estimated 600,000 of the potential 1.8 million DCP and ACRE 
program contracts yet to be approved, getting producer election, 
enrollment and yield certifications completed by the deadline of August 
14 presents an increasing probability of workload issues for local FSA 
offices.
    Should more producers and landowners take the time to understand 
the new ACRE provisions, the majority of the workload for the local FSA 
Offices is expected to take place in late July through the 14th of 
August. In fact, a number of agriculture economists have actually 
recommended that producers and landowners hold off making a decision on 
ACRE until later in the sign-up period to assess the latest market 
prices and how the specific crops in their state and farm are faring. 
Given the likelihood that most growers are likely to delay their 
decision late into the growing season, we are urging USDA to take 
advantage of this narrowing window of opportunity to raise a much 
greater awareness of this new risk management tool.
    In anticipation of possible work load issues in county offices, we 
have proposed to the FSA a modification in sign up procedures that 
would enable producers and landowners interested in ACRE to file an 
``Intention'' to Elect and Enroll into ACRE. This declaration of an 
intention would encourage producers and landowners to visit their local 
FSA Offices now and complete all the required paperwork well in advance 
of the August 14th deadline. If producers and landowners do not notify 
the FSA Office that they want to continue with ACRE, their ACRE 
election and enrollment would revert to DCP. By allowing producers to 
make a final decision on ACRE after submitting the initial enrollment 
documents, the sign-up process would have already been completed 
thereby alleviating long waiting lines at the FSA county office.
    I also want to assure you that NCGA has and will continue our own 
education and communications programs in support of ACRE. One such 
program will be a free national webinar presented by DTN on July 1st 
featuring USDA's top experts on the ACRE program and one of the 
program's key architects, Dr. Carl Zulauf of Ohio State University. We 
are also working with our state associations to remind farmers of the 
sign up deadline and to encourage appointments with their county FSA 
offices to complete their enrollment for the DCP and ACRE programs.
    Another top priority for NCGA and ASA concerns the long delayed 
implementation of much needed changes to the On-Farm (FSA) Storage 
Facility Loan Program. Two of the most important enhancements are the 
increase in the maximum loan limit to $500,000 from $100,000 and an 
extension of the maximum loan term from 7 to 12 years. As you know, 
Congress included these provisions in the 2008 Farm Bill with the 
intent of providing reasonably priced credit to help producers meet 
their increasing storage needs that are growing, in part, because 
trend-line yields of crops such as soybeans and corn are increasing. 
However, many producers have been waiting for the final rules to be 
issued on Section 1614 for a year now, so that they can apply for 
assistance under this program. The implementation must take place as 
quickly as possible for it to be used by producers to build storage 
facilities for this coming harvest season. With the new rules expected 
to be published no earlier than the middle of July, most builders will 
be extremely pressed for time to complete these projects by fall 
harvest.
    FSA announced at public meetings in both Ohio and Kansas on the 
Programmatic Environmental Assessment in early April that the agency 
would be making available soon in their county offices a list of 
documentation that would be required to apply for the loan. Earlier 
distribution of this information would at least allow producers to 
begin gathering information and submitting applications for processing 
ahead of the rule being finalized. I must emphasize that on-farm 
storage is very important to a farm operation's ability to successfully 
manage the marketing of grain. Greater storage capacity simply provides 
growers more flexibility and choices in an increasingly volatile 
marketplace.
    Mr. Chairman, I want to thank you again for this opportunity to 
appear before your Subcommittee and discuss NCGA's concerns regarding 
the implementation progress of two very important farm programs. We 
appreciate your consideration and look forward to working with you and 
your colleagues in the weeks and months ahead to help resolve these 
issues.

    The Chairman Thank you. Mr. Hardwick.

        STATEMENT OF JON W. ``JAY'' HARDWICK, CHAIRMAN,
             NATIONAL COTTON COUNCIL, NEWELLTON, LA

    Mr. Hardwick. Mr. Chairman, thank you for holding this 
important hearing and allowing us to provide our views on the 
implementation of the 2008 Farm Bill. My name is Jay Hardwick, 
and I own and operate a diversified farm based in Newellton, 
Louisiana, and I serve as Chairman of the National Cotton 
Council. I will focus on payment limitations and eligibility 
tests. My written testimony contains details I will not be able 
to cover in the time allotted. I am pleased that a number of 
national commodities and farm organizations listed in my 
statement contributed to and support my remarks. The 2008 Farm 
Bill made the most significant and far-reaching changes in the 
provisions in over 20 years. Among the many changes in the farm 
bill were the implementation and elimination of the three-
entity rule and the new policy of direct attribution of 
benefits.
    The shift to direct attribution could result in a 50 
percent cut in the benefits in some circumstances. The new 
legislation finally removed the discrimination against spouses 
contained in the old rules and significantly strengthened 
penalties for breaking the rules. The legislation eliminated 
limits on marketing loan gains which will result in more 
orderly marketing, better protection for producers in times of 
low prices, and significantly reduce the administrative burden 
on USDA. The former adjusted gross income test is replaced with 
two new eligibility tests based on a new untried definition of 
farm and non-farm income at much lower rates. The new income 
test also contains tough monitoring and enforcement provisions.
    These modifications and revisions are a changed in and by 
themselves by the implementing of the regulations published 
December 26 of last year they went much further. The regulation 
created uncertainty and raised new questions during an already 
difficult adjustment process. Farmers are concerned. They are 
in the middle of an implementation process that many don't 
fully understand. I will touch on a few ways the implementing 
regulations are in our opinion inconsistent with the statute or 
are unclear. The 2008 law essentially made no changes to rules 
used to determine whether a program participant is actively 
engaged in farming. The new regulation, however, made changes 
in this area. In an effort to address passive stockholder 
contributions, the Department went way beyond the statute. The 
regulation ignores the statutory requirement that farming 
activities be judged on a collective basis, and for the first 
time requires every stockholder to make an individual 
contribution of labor or management.
    That individual contribution must be regular, identifiable, 
documentable, separate, and distinct, whatever that means. I am 
concerned that FSA could offer a variety of interpretations as 
to what constitutes separate and distinct contributions of 
labor or management by corporate shareholders, yet program 
eligibility and compliance determination hinge on FSA's 
interpretations. Unfortunately, the same separate, independent, 
and distinct requirement is applied to partnerships. Other 
specific concerns include new requirements that risk of loss be 
commensurate. There are problematic new rules on financing and 
new rules restricting the ability of farming operations to 
reorganize to comply with the new rules. Many operations had 
already begun decision-making for the 2009 crops without 
knowing the USDA would evaluate those decisions using new 
criteria. Congressional efforts to end spousal discrimination 
are being hampered by inconsistencies between the statute, the 
regulations, the 4-PL Handbook, and the notices.
    Mr. Chairman, while we have identified numerous issues that 
need correcting, we commend FSA personnel for their dedication 
and work under severe time constraints. A significant source of 
confusion and inconsistencies will be eliminated if the 
regulations are revised to eliminate the separate and distinct 
requirements for corporations, partnerships, and LSEs to form 
the at risk provisions to the existing statute and to recast 
the spousal eligibility rules. We have additional concerns 
regarding the income test, particularly the definition of farm 
and non-farm income, but I must refer you to the written 
testimony on those points.
    I want to make one important point in closing. There are 
significant uncertainties about the many aspects of the new 
rules. Given these uncertainties and the lack of clear 
direction, it would be patently unfair or unwarranted if 
oversight agencies rake across the landscape sometime in 2010 
and attempt to claim lack of enforcement by USDA or claim 
widespread program abuse. Again, thank you for allowing me to 
present our views and concerns.
    [The prepared statement of Mr. Hardwick follows:]

   Prepared Statement of Jon W. ``Jay'' Hardwick, Chairman, National 
                     Cotton Council, Newellton, LA

    Mr. Chairman, thank you for holding this important hearing and 
allowing us to provide our views on USDA's implementation of the 2008 
farm law. My name is Jay Hardwick. I own and operate a diversified 
farming operation based in Newellton, Louisiana. I am serving as 
Chairman of the National Cotton Council. I am pleased to note that in 
keeping with your desire that witnesses not re-plow the same ground the 
USA Rice Federation, U.S. Rice Producers Association, American Soybean 
Association, National Corn Growers Association, National Association of 
Wheat Growers, Southern Peanut Farmers Federation and American Farm 
Bureau Federation have all provided input for my statement and have 
associated their organizations with my remarks.
    Mr. Chairman, the focus of my remarks will be on payment 
limitations and eligibility because these provisions have a significant 
impact on cotton, rice and peanut operations. However, I also believe 
the elimination of the three-entity rule and the new income tests will 
have a far greater impact on grain, oilseed and specialty crop 
operations than may be understood.
    Mr. Chairman, I request that the documents accompanying my written 
statement including the letter dated September 24 signed by 62 Members 
of the House; the letter dated March 13 signed by 68 Members; and, the 
letter dated April 6 signed by a variety of agriculture organizations, 
all urging prompt implementation of the statute consistent with the 
intent, be made a part of the record. I also request that the Council's 
comments on the interim, final rule implementing the payment limitation 
and adjusted gross income provisions and some of the forms required to 
be completed by program applicants also be made part of the record.
    The provisions of the 2008 farm law made the most significant and 
far-reaching changes in payment limitations and program eligibility 
provisions in over 20 years. Yet the rhetoric and the budget proposals 
of the new Administration consistently gloss over the sweeping reforms 
in the new farm law and seem unconcerned about discovering the actual 
impact of those changes. Even though USDA-ERS analysis has concluded 
program benefits have not been a primary influence in increasing farm 
size, critics continue to insist that farm program payments are causing 
farm consolidation. ERS analysis also shows that farm programs 
contributed less than 8% of increased value of farmland while low 
interest rates and non-agricultural factors played a far more 
significant role. Given this analysis, it seems clear that the 
continued effort to revise further the significant changes in the 2008 
law does not reflect concerns about concentration but is really about 
moving funds away from production agriculture.
    As a quick reminder, the new farm law changed a fundamental premise 
of payment limitations by replacing the focus on farm entities with a 
policy of direct attribution of benefits. It eliminated the three-
entity rule. It eliminated spousal discrimination. The $65,000 
cumulative limit on countercyclical and ACRE payments and the $40,000 
cumulative limit on direct payments as well as separate limits for 
peanuts were retained. The new law eliminated the limit on marketing 
loan gains, which will promote more orderly marketing, better protect 
producers in times of low prices, and importantly will reduce the 
administrative burden on USDA's Farm Service Agency. The new 
legislation strengthens penalties for knowingly breaking the rules.
    There are three new eligibility tests based on income.

   If an individual's or entity's 3 year average adjusted gross 
        farm income exceeds $750,000 they are ineligible for direct 
        payments;

   If an individual's or entity's 3 year average adjusted gross 
        non-farm income exceeds $500,000, they receive no program 
        benefits; and

   If their 3 year average adjusted gross non-farm income is 
        greater than $1 million and less than 66\2/3\% of their 3 year 
        average adjusted gross income is from non-farm sources, they 
        are ineligible for conservation programs.

    These new income tests also contain tough monitoring and 
enforcement provisions, including the requirement that USDA develop a 
statistically valid monitoring procedure to enhance enforcement. To any 
reasonably objective observer, these far-reaching modifications and 
revisions are very significant changes yet we do not know their full 
impact.
    We believe that in certain circumstances, the elimination of the 
three-entity rule could result in a 50% cut in benefits. However, in 
spite of the vast array of data available on U.S. farming operations, 
neither the Council nor USDA can accurately predict how many operations 
will be affected or to what extent they will be affected. I do know 
from conversations with other farmers, attorneys and CPA's that the new 
forms and requirements have forced many farmers to review their day-to-
day operations. Under the new regulations, even long-standing, simple 
partnerships must be concerned with how they make operational 
decisions. It has been a struggle for farms to comply with the new 
requirements and, even so, we know that program benefits are going to 
be reduced or denied to a number of operations. But until sign-up is 
complete, we won't know the extent of the impact--just that it is 
significant.
    While the statute included far-reaching changes that would have 
significant, uncertain impacts, the implementing regulations went even 
further, making significant alterations in areas of the law Congress 
did not intend to be changed.
    The interim, final regulation was published late, December 26, 
2008. It made sweeping changes in areas that were not amended in the 
farm bill. It also limited the impact of some changes that were made by 
Congress in the farm bill, particularly the spousal eligibility 
provision.
    I have provided you with a copy of the National Cotton Council's 
comments on the proposed rule. A few of our concerns were addressed by 
provisions in the Handbook, known as 4-PL, published in late spring, 
and subsequent FSA Notices. Today I will highlight only key provisions 
which we continue to believe are inconsistent with the statute or are 
unclear.
    Even though Congress made no substantive changes to existing rules 
governing whether a program participant is actively engaged in farming, 
USDA ignored this and promulgated problematic new rules in this area.
    For example, although the statute continues to require that 
contributions to a farming operation by shareholders in corporations be 
measured on a collective basis, the interim regulations, for the first 
time, require that every shareholder make an individual contribution of 
labor or management and the contribution be regular, identifiable, 
documentable, separate and distinct.
    Mr. Chairman, I understand USDA's concern about ``passive'' 
shareholders. However, the addition of the new requirements regarding 
stockholders goes well beyond this concern and certainly beyond the 
intent of the statute. The new requirements are vague and, in many 
cases, the reason for the new requirements is difficult to understand. 
I believe these provisions will be a continual cause of confusion and 
uncertainty for farmers, because if you ask ten FSA employees to 
explain what constitutes separate and distinct contributions of labor 
or management, you will get ten different answers. In the world created 
in these regulations, corporations cannot take satisfactory action as a 
Board or as a collective meeting of stockholders. Instead, each 
stockholder must take some independent and distinct action, even though 
corporations virtually never authorize independent shareholder action.
    When compliance audits are conducted, there will be even more 
confusion because the interpretations will vary. Worse, since the 
regulations were not published until December 2008 and the Handbook and 
clarifying Notices were still being published in the Spring, many 
operations had already begun making their plans for the 2009 crops. 
They may have arranged financing, leased land and purchased inputs. 
These farms had no idea that many of their operational decisions would 
have to be made by each shareholder acting independently, separately 
and distinctly.
    Incredibly, this same, ``separate, independent and distinct'' 
requirement is also being applied to partnerships, calling into 
question whether partners are actually engaged in a farming operation 
if they make their decisions jointly.
    The regulation also adds a new requirement that contributions to 
the farming operation must be at risk for loss and that loss be 
commensurate with the claimed share of the farming operation. This new 
regulatory addition could mean that in the case of a father who has 
farmed for years and accumulated a significant net worth, a 50/50 
partnership with his son or daughter who has just begun farming may not 
be eligible for benefits because the son or daughter does not have 
substantial wealth available to lose. This is another example of a new 
administrative requirement that doesn't make sense and is not supported 
by the statute.
    We are also concerned by the new definition of substantive change. 
While the statute did not waive the substantive change rule to allow 
operations to adjust their organizations to comply with these sweeping 
new regulations, it certainly did not make it tougher for farms to 
comply. Previously, complying with this rule meant adding a family 
member or increasing or decreasing the land farmed by the operation by 
at least 20%. The new regulations, however, raised the bar on 
substantive change as well. Under the new definition, an operation must 
increase or decrease its base acres by at least 20%, and if the change 
results in more than one additional payment the plan must be approved 
at the state level. This is another example where the regulations 
exceeded the statute, where they force significant, impracticable 
changes in farming operations, and then make those changes more 
difficult than ever to accomplish.
    We are also concerned by the inconsistency between the statute, the 
regulation and the Handbook in implementing the new spousal eligibility 
provision. Congress clearly intended that when a husband and wife are 
farming together in the same operation, one spouse may make all 
required contributions of labor or management on behalf of the other 
spouse. However, USDA has imposed severe limitations on this rule in 
the regulations and the Handbook. These limitations will unduly 
restrict the ability of operations involving spouses to choose how they 
use corporations and limited liability companies to limit their 
personal and their family's liability.
    We believe this important provision should be implemented in a 
manner that better carries out Congress' intent by providing husbands 
and wives the flexibility to use the same liability-limiting business 
arrangements as are used by all other types of businesses.
    There are other portions of the regulation that are problematic, 
including restrictions on financing and other highly technical matters. 
These issues are discussed in our detailed comments on the rule. We 
strongly recommend the interim regulation be amended to eliminate the 
changes in the definition of actively engaged and other provisions not 
contemplated by the 2008 farm law amendments.
    Furthermore, USDA has made the payment limitations and adjusted 
gross income requirements a moving target. The farm bill was enacted on 
June 18, 2008. However, USDA did not publish interim regulations on 
payment limits and income tests until December and did not issue its 
new payment limitations handbook, 4-PL, until February of this year. 
The new 902 forms, first issued in December, were revised in April of 
this year, and 4-PL was substantially revised in May. Each of these 
revisions made substantive changes to the payment limitations and 
adjusted gross income requirements. The requirements are still in flux, 
as USDA continues to send out additional ``guidance'' memoranda to its 
state and county offices making further ``clarifications'' to the 
rules, some of which run contrary to earlier clarifications. Even with 
the assistance of lawyers and accountants, farmers cannot be certain 
what rules actually apply this week and whether those same rules will 
apply next week.
    The delay in publishing the regulation, the Handbook and Notices 
and in training FSA personnel has created a catch-22. Unfortunately, at 
this late date, correcting the regulation for the 2009 crop sign-up 
would only add further confusion and delays in approving farm plans and 
providing program benefits. While adjustments effective for the 2010 
crop subject operations to three sets of rules over 3 crop years, it is 
our opinion that USDA should correct those areas where they have 
overreached the intent of the 2008 farm law.
    The new farm law also creates three new income tests used to 
determine eligibility. Previously, the test was based on adjusted gross 
income or an equivalent measure which is relatively easy for growers to 
document and FSA to audit. The new tests are based on average adjusted 
farm and non-farm income. Rather than check a specific line on an 
income tax return, growers now have to designate all income as farm or 
non-farm to determine eligibility. Recognizing farm income is more than 
just the income listed on a Schedule F, Congress provided some 
direction in the statute by defining certain sources as farm income and 
providing the Secretary authority to define other sources as 
appropriate. We have been disappointed that USDA did not do more to 
obtain input from farmers and accountants concerning how best to 
designate sources of income as farm and non-farm. USDA did not ask for 
recommendations concerning how to define certain sources of income for 
the purpose of applying the new tests thus leaving farmers with the 
task of interpreting the appropriate designations of income. These 
designations are critically important because they determine 
eligibility for all program benefits.
    USDA provides another example of regulatory overreaching and 
inconsistency between the regulations and other implementation 
materials regarding the income limitations. While the legislation and 
the 926 Form being used by CCC require a person to provide to the 
Secretary either a certification of average income or information and 
documentation regarding average income at least once every 3 years, the 
regulations allow the Secretary to require such certification every 
year and ignore the documentation option. We urge USDA to be consistent 
by changing the regulations to include the option to provide sufficient 
documentation as an alternative to third-party certifications and to 
clarify that such certification or documentation must occur only every 
3 years.
    We were surprised and concerned to learn from a March 19 press 
release that USDA has entered into an agreement with the IRS to share 
data and further that every program participant must file a separate 
form authorizing the IRS to release data to USDA or the producer will 
be ineligible for benefits even though virtually identical language is 
on an existing USDA form (CCC-926). While we have been assured that the 
IRS will not provide taxpayer information to USDA, we have been advised 
that USDA will provide taxpayer ID's of all program participants and 
ask IRS to review records to identify those ID's who may have income 
above the relevant income test levels. However, we do not know what 
criteria USDA has asked IRS to use, nor have we been advised what 
procedure will be followed to determine compliance once a taxpayer's ID 
is identified for further scrutiny. We also have no assurance that if 
the IRS--using USDA's criteria--identifies an ID for further review, 
even though they may ultimately be determined to be in compliance, that 
the list won't be subject to a Freedom of Information request. 
Furthermore, given the expanded definition of farm income for payment 
eligibility purposes versus tax definitions, a review by IRS will have 
little relevance in indicating eligibility.
    Mr. Chairman, growers are required by the law to certify they are 
in compliance with the income tests and eligible for program benefits. 
There are strict penalties for providing false or incorrect 
information. The GAO report that is cited by USDA as the impetus for 
this IRS review indicated that 2,700 of the 1.8 million program 
participants may have erroneously received $49 million in payments over 
4 years during which farm program payments totaled $63.8 billion. To 
put that in perspective, the erroneous payments amounted to less than 
\1/10\ of one percent of total payments. Certainly, USDA should 
vigorously enforce the rules, but at some point the costs, both 
administratively and to an individual's privacy, are so excessive 
compared to the return that they should be reconsidered.
    Finally, allow me to address the forms necessary to apply for 
program benefits. They are attached to my written statement. Clearly, 
early versions overreached by requesting information that was difficult 
if not impossible for farmers to provide and, in some cases, that was 
not relevant or necessary to determine eligibility. I understand some 
forms have been revised, and I urge FSA to continue to review and 
modify the forms to make them as user-friendly as possible. Even the 
smallest operation must certify income and file a detailed farm plan, 
so forms should be designed for them as well as for the most complex 
operations. The 2008 law was not entitled the ``Full Employment for 
Lawyers Act.''
    Mr. Chairman, while we have many issues that need correcting, we 
nevertheless commend FSA personnel for their dedication and work under 
severe time constraints. We believe a significant source of confusion 
and cause of inconsistent application of the rules will be eliminated 
if the interim regulation is revised to eliminate the requirement that 
contributions be made on a separate and distinct basis and to conform 
the ``at risk'' provisions to the existing statute. We believe the 
provisions related to spousal eligibility should be recast as straight-
forward as intended. We urge FSA to continue to review all forms to 
simplify them.
    We also urge USDA to continually monitor sources of income to 
determine if they could be considered farm income and to proceed 
cautiously and to seek stakeholder input before finalizing the data 
exchange and review process with the IRS.
    Mr. Chairman, the 2008 farm law made a number of historic reforms 
in payment eligibility provisions. Congress and stakeholders have urged 
USDA to implement the statute consistent with intent. We are still 
working through USDA's own rules and still coming to grips with the 
2008 law's sweeping changes. This is not the time to make further, 
unwarranted changes, but it is time for USDA to correct the areas where 
they have implemented onerous changes that were not authorized by the 
new farm law.
    I want to be clear, however, that there are significant 
uncertainties among producers, lawyers, accountants and even USDA 
program specialists about many critical aspects of these new rules. I 
have been told there are uncertainties regarding the leasing of land 
and equipment, uncertainties regarding the sources of financing, in 
addition to some of the problems I have already noted. Washington, DC, 
program specialists have not been able to answer all of the questions 
being raised. Given these uncertainties and the lack of clear 
direction, it would be patently unfair and unwarranted if oversight 
agencies rake across this landscape sometime in 2010 in an attempt to 
claim lack of enforcement by USDA or to claim widespread program 
abuses.
    Again, thank you for allowing me to present our views and concerns.

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    The Chairman Thank you very much. I appreciate it. Mr. 
Younggren.

  STATEMENT OF ERIK YOUNGGREN, SECRETARY-TREASURER, NATIONAL 
   ASSOCIATION OF WHEAT GROWERS; MEMBER, BOARD OF DIRECTORS, 
MINNESOTA ASSOCIATION OF WHEAT GROWERS; WHEAT, SUGAR BEET, AND 
                 SOYBEAN PRODUCER, HALLOCK, MN

    Mr. Younggren. Chairman Boswell, Congressman Moran, and 
Members of the Subcommittee, my name is Erik Younggren. I am a 
fourth-generation farmer from Hallock, Minnesota, where I 
produce wheat, sugar beets, and soybeans in operation with two 
of my cousins. I currently serve as Secretary-Treasurer of the 
National Association of Wheat Growers, and I am happy to be 
here today to share some thoughts on behalf of America's wheat 
producers. First, let me thank you for holding this hearing. We 
appreciate the work of this Subcommittee, particularly your 
efforts to maintain a strong safety net for farmers across the 
country in the 2008 Farm Bill. Considering the vast competing 
priorities and limited dollars with which Members were faced 
during the crafting of that legislation, we believe Congress 
created a law that preserved a strong farm safety net.
    Since passage of that legislation, we have appreciated the 
willingness of USDA to hear and respond to our comments and 
concerns related to implementation. We have also been extremely 
grateful for the dedicated Farm Service Agency employees who 
are doing yeoman's work to sort through the implementing rules 
and regulations that have been made available. However, I would 
be remiss to be at this hearing today and not relay the extreme 
frustration currently felt in the countryside regarding farm 
bill implementation. It has been more than a year since the 
bill was initially passed, but there are still questions about 
how and when some programs will be put in place. At this point, 
many producers are being required to make management decisions 
that will impact the future of their farming operations without 
even knowing the rules.
    If I could leave you with one message today, it would be 
this. Farmers need to know the rules. A safety net is not a 
safety net if farmers inadvertently disqualify themselves due 
to program complexities or lack of information. Though there 
are a number of specific issues in which we take great interest 
crop insurance, payment eligibility requirements and ACRE being 
a few for the purposes of this hearing, I will focus on some 
general comments concerning the new Supplemental Revenue 
Assistance program or SURE in which many of our members have 
great interest. I would also like to note that the American 
Soybean Association, National Barley Growers Association, 
National Cotton Council, and USA Rice Federation have provided 
input for this statement and have associated their 
organizations with my remarks. Enthusiasm for the SURE program 
is currently tempered by frustration related to its delayed 
implementation.
    Though we appreciate USDA's commitment to expedite the 
rulemaking procedures for this program and other farm bill 
initiatives, we would nevertheless like to stress the need for 
the Administration to issue SURE rules as soon as possible. If 
at all possible, we would like to see them in advance of the 
August 14 program sign-up deadline. There are a number of 
pending implementation details that will affect the utility of 
the SURE program to our members highlighting the need for 
regulation without further delay. For example, in order to make 
sure we work as effectively as possible with crop insurance, we 
believe USDA should use netted out-farmer paid crop insurance 
indemnities for purposes of calculating total farm revenue 
under SURE. The determination of whether to use net versus 
gross crop insurance indemnities will have a significant impact 
on the utility of this program to our producers, especially for 
those farmers purchasing higher crop insurance coverage levels.
    Based on precedent established under previous crop disaster 
programs as well as practicality, we think this is the most 
appropriate route. We also urge USDA to further clarify NAP 
coverage requirements and give reasonable leeway on this issue 
with consideration to regional and operational diversity among 
growers. A great deal of confusion ensued this spring related 
to insurance purchase requirements for SURE eligibility, most 
of which traced back to unclear requirements regarding coverage 
on second crops planted after a late freeze or other disaster. 
We thank USDA for their recent efforts to address this issue, 
but believe this is an area where further USDA guidance can 
prevent future confusion.
    Last, we urge USDA to work toward greater clarity on what 
constitutes a farm for purposes of the SURE program. We 
understand the program was designed to look at the whole farm 
but that is not as simple as it may sound. There have been many 
questions related to how this new definition will be 
interpreted and applied, especially as it relates to landlord 
and tenant relationships, as well as for those involved in 
multiple farming operations. Though these are only a few 
examples of issues needing clarity through regulation these 
items will largely determine the utility of this program to 
other members and will have an impact on producers, farm 
program, and risk management decisions. Again, we look forward 
to working with Congress and USDA to ensure that this program 
is implemented in a way that will maximize its utility and 
effectiveness as another piece of the overall farm safety net. 
Mr. Chairman and Members of the Subcommittee, I again, thank 
you very much for this opportunity to testify and stand ready 
to answer any questions you may have.
    [The prepared statement of Mr. Younggren follows:]

  Prepared Statement of Erik Younggren, Secretary-Treasurer, National
  Association of Wheat Growers; Member, Board of Directors, Minnesota 
Association of Wheat Growers; Wheat, Sugar beet, and Soybean Producer, 
                              Hallock, MN

    Chairman Boswell, Congressman Moran and Members of the 
Subcommittee, my name is Erik Younggren. I am a fourth-generation 
farmer from Hallock, Minn., where I produce wheat, sugar beets and 
soybeans in operation with two of my cousins. I am an active member of 
the Minnesota Association of Wheat Growers' Board of Directors and 
currently serve as Secretary-Treasurer of the National Association of 
Wheat Growers (NAWG), a federation of 20 state wheat grower 
associations.
    First let me thank you for holding this hearing. We appreciate the 
work of this Subcommittee--particularly those efforts that went into 
crafting the Food, Conservation, and Energy Act of 2008 and your 
efforts to maintain a strong safety net for farmers across the country.
    I appreciate this opportunity to offer NAWG's thoughts on behalf of 
wheat growers on the status of the implementation of this vital piece 
of legislation.
Program-Wide Implementation Issues
    Considering the vast competing priorities and limited dollars which 
with Members were faced during the crafting of this legislation, we 
believe Congress passed a strong and balanced farm bill. We were 
particularly pleased that Congress maintained the direct payment--the 
single leg of the three-legged safety net that is predictable on 
producers' balance sheets, and the most World Trade Organization (WTO) 
compliant of the three traditional Title I programs. In addition, 
Congress' dedication to maintaining a strong Federal crop insurance 
program was paramount, particularly as the utility of new programs such 
as the Supplemental Revenue Assistance (SURE) program and the Average 
Crop Revenue Election (ACRE) program continues to be dependent on a 
healthy and reliable crop insurance component.
    Since passage of the legislation, we have appreciated the 
willingness of USDA to hear and respond to our concerns regarding 
implementation. We also would like to express our sincere gratitude to 
the dedicated Farm Service Agency (FSA) employees who are doing 
yeoman's work to sort through these rules and regulations and 
effectively communicate to producers.
    However, I would be remiss to not relay the extreme frustration 
currently felt in the countryside regarding implementation of the 2008 
Farm Bill, particularly regarding newly created programs and 
significant rule changes. It has been more than a year since the bill 
was initially passed, and growers are frustrated with the lack of 
quality information on how (or when) these programs will be put in 
place and how they might function for individual operations.
    The content of the rules has a great bearing on the potential 
effectiveness of these programs. At this point in the process, many 
farmers across the country are being required to make management 
decisions that will impact the future of their farming operations 
without knowing what is needed to comply with relevant rules.

    If I could leave you with one message today, it would be that 
farmers need to know the rules. A safety net is not a safety net if 
farmers inadvertently disqualify themselves due to program complexities 
or lack of information.

    Despite substantial and commendable efforts expended by local FSA 
employees, it is clear that they have not been given adequate training 
in these new, complex programs in order to relay that information 
effectively to growers. This situation is made even more challenging by 
the fact that, in some cases, there is no information to give because 
implementing regulations are not yet available or, in the case of 
payment eligibility, criteria continue to evolve.
    In addition to the complexities of individual programs, producers 
and FSA employees alike are just beginning to recognize the complexity 
of how they interact. The amount of analysis that will be required to 
determine how each management decision will impact future program 
payments, disaster eligibility and profit margins is overwhelming. Very 
little has been done to date to aid producers in understanding or 
interpreting these interactions or impacts.
    Many in the private and association sector are in the process of 
offering educational tools to producers to help them during the farm 
program sign-up process. These tools and opportunities are also 
available to FSA employees, but we see USDA as holding the primary 
responsibility for educating FSA staff about the implications this 
policy will have for growers and their operations.
    We recognize that the needs of USDA's Farm Service Agency are 
great. The agency's computer systems are drastically inadequate to 
handle even basic crop reporting functions, let alone complex programs 
such as SURE and ACRE. And we recognize that there are limited 
resources to remedy these inadequacies.
    We pledge our assistance to you in Congress and to those in the 
Administration to ensure that sufficient resources are available for IT 
upgrades, employee training and other needs imperative to implementing 
these programs.
    Though there are a number of specific farm bill implementation 
issues in which we take great interest--crop insurance, payment 
eligibility requirements and ACRE being a few--for the purposes of this 
hearing, I would like to focus on one main topic of great interest to 
our members: implementation of the SURE program. The American Soybean 
Association, National Barley Growers Association, National Cotton 
Council and USA Rice Federation have provided input for this statement 
and have associated their organizations with the remarks that follow.
Supplemental Revenue Assistance (SURE) Program
    Considering wheat-growing areas span from Washington State to 
Virginia, and from Minnesota to Texas, there is likely to be some form 
of disaster in wheat growing country every year, be it drought, flood 
or some other untimely visit from Mother Nature.
    Wheat growers have long been thankful for the recognition of 
Congress that there needs to be some form of assistance related to 
these severe crop losses. Historically, assistance has come in the form 
of ad hoc disaster programs, often passed long after the event occurred 
and implemented even later. We were pleased to see the SURE program 
created to relieve some of the reliance on less timely and fiscally 
burdensome ad hoc disaster programs.
    As you know, the SURE program was designed to supplement the 
revenue protection producers can purchase from private crop insurance 
companies. Though SURE may provide lower levels of benefits than 
previous ad hoc programs for some producers, growers have been 
generally supportive of the program's creation. However, that support 
is currently tempered by frustration related to its complexity and 
delayed implementation.
    The most significant frustration related to the SURE program is the 
current lack of rules. We believe that a high percentage of wheat 
growers will try to meet those eligibility requirements over which they 
have control (such as ensuring that they meet the insurance purchase 
requirements), but the lack of rules makes it difficult for growers to 
make well-informed risk management decisions or estimate any potential 
2008 payments.
    We recognize the complexity of the SURE program and appreciate 
USDA's commitment to expedite the rulemaking procedures for this 
program along with other farm bill initiatives. We also wish to provide 
some specific feedback relating to the administration of SURE that will 
impact the quality and effectiveness of the program. We hope that these 
suggestions will have the support of Congress and be adopted by the 
Administration.
Timing
    We strongly urge the Administration to issue SURE rules as soon as 
possible, and if possible, in advance of the Aug. 14 deadline by which 
growers are required to make farm program election decisions. Several 
pending questions related to details of the SURE program, including 
which insurance price election will be used in the SURE calculation, 
will play into producers' determinations of whether or not to sign up 
for the ACRE program.
    In addition, knowing the rules prior to the Sept. 30 crop insurance 
deadline will be particularly important for winter wheat farmers as 
they may desire to change coverage levels in order to improve coverage 
under the SURE program. The 2008 year will be a great test year in 
wheat country considering the losses experienced in parts of Kansas, 
Oklahoma, Texas and the Northern Plains, but it would be beneficial to 
understand how these losses will be paid under the SURE program to help 
inform farmers of its utility prior to the Sept. 30 crop insurance 
deadline.
Calculation of Total Farm Revenue
    According to statute, total farm revenue includes crop insurance 
indemnities, but the decision to use net versus gross is left to the 
discretion of the Secretary. This determination will have a significant 
impact on the utility of this program to our producers, especially for 
those farmers purchasing higher crop insurance coverage levels.
    Previous crop disaster programs have utilized net crop insurance 
indemnities as a matter of practice--that is, they reduce the gross 
indemnity by the crop insurance premium paid in order to arrive at the 
net indemnity payment. This practice has encouraged growers to increase 
coverage levels and supplement coverage in a way that covers shallow 
revenue losses. Conversely, use of gross crop insurance indemnities 
will reduce the incentive--or in some cases even work as a 
disincentive--for farmers to purchase buy-up coverage.
    Based on precedent established under previous crop disaster 
programs as well as the practical implications related to use of net 
versus gross crop insurance indemnities, we believe USDA should use 
netted out farmer-paid crop insurance indemnities for purposes of 
calculating total farm revenue under SURE.
Definition of ``Farm''
    The SURE program creates a new definition for ``farm,'' which 
includes ``the sum of all crop acreage in all counties that is planted 
or intended to be planted'' by an ``eligible producer.'' An ``eligible 
producer'' is defined as a person, a corporation or a partnership, 
whichever is applicable.
    We understand the program was designed to look at the ``whole 
farm,'' but that is not as simple as it may sound. There have been many 
questions related to how this new definition will be interpreted and 
applied, especially as it relates to landlord and tenant relationships 
as well as for those involved in multiple farming operations. USDA 
should take these scenarios into consideration and clarify what 
constitutes a ``farm'' for purposes of the SURE program.
NAP Coverage Requirements
    Following the spring freeze in Oklahoma and disasters in parts of 
Texas and Kansas, a great deal of confusion ensued in wheat country 
related to insurance purchase requirements for SURE eligibility. Much 
of the confusion was related to unclear requirements regarding NAP or 
other insurance coverage on second crops planted after freeze or other 
disaster conditions. This issue was largely traced back to a difference 
between RMA and FSA definitions of a double crop, and USDA has been 
working to remedy this discrepancy.
    We thank USDA for their recent efforts to address this specific 
issue. However, there are other instances in which growers are required 
to making decisions related to NAP coverage without ample information 
or understanding of the requirements, or they are subject to 
unrealistic timelines under which they must choose coverage. For 
example, NAP deadlines may emerge before some growers have determined 
what crops they will plant.
    To prevent future instances of confusion, we urge USDA to further 
clarify NAP coverage requirements and consider giving reasonable leeway 
in decision making out of consideration to regional and operational 
diversity among growers.
Conclusion
    Cumulatively, these issues speak loudly to the need for regulations 
to be published without further delay. Producers are being expected to 
make planting decisions absent clarity on the programs and should not 
be forced to deal with unnecessary uncertainty in addition to the 
uncertainties already presented by markets, prices and weather.
    We look forward to continuing to work with Congress and USDA both 
prior to and following issuance of the SURE regulations to ensure that 
these clarifications are made and the program is implemented in a way 
that will maximize its utility and effectiveness as another piece of 
the farm safety net.
    We greatly appreciate the role you have played in both creating 
this bill and ensuring that the Administration implements it as you, 
the authors, intended. We pledge our support to both this Subcommittee 
as well as the Administration to ensure that the utility of all 2008 
Farm Bill programs is fully realized.
    Mr. Chairman and Members of the Subcommittee, I thank you for this 
opportunity to testify.

    The Chairman Thank you very much. Mr. Johnson, please.

STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION, 
                        WASHINGTON, D.C.

    Mr. Johnson. Thank you, Mr. Chairman, and Members of the 
Committee for holding this hearing relative to the 2008 Farm 
Bill implementation process. As rural America is dealing with 
one of the most severe economic crises in history, especially 
relative to the livestock sectors, the goals of the 2008 Farm 
Bill will certainly be tested. USDA must implement the 
provisions as intended by Congress. For programs awaiting 
regulatory action, we urge the Department to be particularly 
cognizant of Congressional intent and be timely in getting 
programs up and running. I would like to discuss three 
elements, in particular the first one being permanent disaster 
or the SURE program. This was obviously a very top priority for 
the National Farmers Union. Our members believe the lack of a 
standing disaster program was the single biggest hole in the 
safety net. This new comprehensive disaster program is designed 
differently than the earlier ad hoc disaster programs which had 
lots of issues associated with them. We would like to make sure 
that the SURE program does not have those same issues 
associated with them.
    This program was designed on principles to ensure 
incentives for enhanced crop insurance participation and 
provide assistance for whole farm revenue losses. Proper 
implementation will keep crop insurance as the primary risk 
management tool for producers appropriately so. It will target 
disaster assistance to those with proven losses on a farm's 
entire crop production. Other components of this disaster 
program include the Livestock Indemnity Program, the Livestock 
Forage Program, the Livestock Emergency Assistance Program for 
a number of different entities.
    To date, no regulations have been issued for any of these 
programs. We understand if the need for delay with respect to 
the SURE program because it is new, it is complex, it, in fact, 
it has a December requirement for implementation, but beyond 
that it doesn't really become effective until after the crop 
year and you sort of roll all the receipts together. However, 
for these livestock-related indemnity programs, in particular, 
there is an urgency to get these regulations out very soon. We 
visited with the Secretary a number of times. He understands 
that urgency and we are hopeful that those regs will come out 
yet, maybe this month. With respect to payment limitations, 
this was another issue that we spent a lot of time and gave a 
lot of attention to. There was, as a previous panelist has 
said, indicated significant reform. We supported the idea of 
the three-entity rule elimination and the direct attribution. 
This was significant payment limitation reform, and we need to 
be very careful as to how that is implemented.
    As you have heard from other panelists, there is 
significant anxiety in the countryside about the insertion of 
IRS into some of these determinations. We think it is 
appropriate for the partnership between USDA and the IRS to 
verify eligibility and those sorts of things, but we hope that 
the least intrusive manner possible for these verification 
processes is the one that is ultimately chosen. Many of you are 
aware that, in recent months, there is a serious disaster 
occurring across the country, an economic disaster related 
specifically to the dairy industry, more generally to much of 
the livestock industry. The economic collapse of the dairy 
industry is spreading. It is impacting many in its wake. Demand 
is shrinking. Market prices are collapsing. Input costs are 
going up and reduced credit is available. There is a unique set 
of challenges that is being faced right now by the dairy 
industry and, in fact, many others in the livestock sector.
    Our organization was one of the few to call for the 
elimination of the direct payments to bolster other facets of 
the farm safety net. This might be one example where those 
revenues or those dollars might more appropriately have been 
used regardless. The decision was made on the farm bill. I 
think it is incumbent now upon Congress and the Administration 
to relook at just exactly what is happening in the livestock 
sector and to start thinking about whether there are not 
additional policy tools that need to be put in place in order 
to protect that industry. While there are a number of other 
programs that are not under this Subcommittee's jurisdiction, I 
would be remiss if I didn't at least mention the conservation 
programs, country of origin labeling being one that we followed 
very closely.
    I thank most of you on this Committee obviously for the 
good work that you have done on that and look forward to full 
implementation of that price reporting, PSA enforcement and 
contract reforms or other big issues, and of course interstate 
shipment of state-inspected meat was another area where we 
focused a lot of attention and wish to thank the Committee and 
Members of Congress for giving new latitude to states with 
respect to this issue. I would be pleased to respond to any 
questions, and thanks again for the hearing.
    [The prepared statement of Mr. Johnson follows:]

Prepared Statement of Roger Johnson, President, National Farmers Union, 
                            Washington, D.C.

    Good morning, Mr. Chairman and Members of the Committee. I 
appreciate the opportunity to testify on behalf of the farm, ranch and 
rural members of National Farmers Union (NFU). My name is Roger Johnson 
and I am the President of NFU--a nationwide organization representing 
more than 250,000 farm, ranch and rural residents.
    As rural America is dealing with one of the most severe economic 
crises in history, the goals of the 2008 Farm Bill will be tested. In 
order for programs contained within the 2008 Farm Bill to be 
successful, the U.S. Department of Agriculture (USDA) must implement 
the provisions as intended by Congress. NFU urged Secretary Vilsack and 
his new team to take inventory of the status of all regulations, both 
issued and pending, to ensure the intent of Congress was met. For 
programs awaiting regulatory action, we urge the Department to be 
cognizant of Congressional intent and timely in getting programs up and 
running.
    The Supplemental Agricultural Disaster Assistance program was a top 
priority for NFU. Our members believe the lack of a standing disaster 
program was the single biggest hole in the safety net. This new 
comprehensive disaster program is designed differently than ad hoc 
disaster packages and includes a variety of new programs and 
eligibility requirements. The Supplemental Revenue Assistance (SURE) 
program was designed on principles to ensure incentives for enhanced 
crop insurance participation and provide assistance for whole-farm 
revenue losses. Proper implementation will keep crop insurance as the 
primary risk management tool for producers and target supplementary 
disaster assistance to those with proven losses on a farm's entire crop 
production. Other components of the comprehensive disaster program 
include the Livestock Indemnity Program (LIP), Livestock Forage Program 
(LFP), Emergency Assistance for Livestock, Honeybees and Catfish 
Program and Tree Assistance Program. To date, no regulations have been 
issued for these new programs.
    The 2008 Farm Bill introduced significant reform to both farm 
program payment limitations and eligibility rules. The legislation 
represented a major departure from previous policy by replacing the 
three-entity rule with the direct attribution and placing hard caps on 
adjusted gross income both on and off the farm. These changes are 
significant reforms, but careful attention must be given to the 
implementation and interpretation of the reforms.
    We commend USDA for partnering with the Internal Revenue Service 
(IRS) to verify farm program payment adjusted gross income eligibility. 
However, significant anxiety is being expressed over the use of IRS 
information. Anxiety could be eased with a proactive and aggressive 
information campaign to ensure producers fully understand the 
partnership with IRS and means to protect individual producer 
information. USDA must listen to the concerns of producers and 
determine the least intrusive manner of using IRS information for farm 
program payment eligibility compliance efforts.
    As you may know, the economic collapse of the dairy industry is 
spreading and impacting many in its wake. With demand shrinking, market 
prices collapsing, input costs increasing and reduced credit 
availability, dairy farmers are facing a unique set of challenges on 
multiple fronts. During farm bill negotiations, NFU was the only 
organization to call for the elimination of direct payments to bolster 
the other facets of the farm safety net. The current dairy crisis is an 
example of the inadequate price safety net contained in the farm bill. 
Congress and USDA need to take immediate actions to mitigate the 
extensive and irreparable damage being experienced by the dairy 
industry.
    While not under the jurisdiction of this Subcommittee, a variety of 
additional farm bill programs are of significant importance to our 
membership.
    Conservation programs--Implementation is vital to the planning 
process of producers across the country. Timely deployment of all 
conservation regulations is paramount.
    Country of Origin Labeling--Implementation of COOL was a high 
priority for NFU and we were pleased a compromise agreement could be 
reached. As the program is implemented, we will closely monitor 
compliance rates to ensure the integrity of the program is achieved.
    Price Reporting, PSA Enforcement and Contract Reforms--Market 
transparency and competition are pivotal to the ability of independent 
livestock producers to receive a fair price for their livestock. Timely 
implementation of the livestock reporting requirements and new PSA 
enforcement requirements will ensure independent producers no longer 
fight anti-competitive practices with their hands tied behind their 
backs. The variety of contract reforms included in the bill is 
important to protecting vulnerable contract producers.
    Interstate Shipment of Meat--The new compromise voluntary program 
is a core competition policy for our nation's livestock producers. 
Appropriate implementation that maintains the integrity of the 
compromise is important.
    The 2008 Farm Bill included many important provisions and programs, 
reflecting a 2 year deliberation that included many compromises. More 
than 73 percent of the bill is for nutrition programs to fight hunger. 
The bill goes beyond the programs I mentioned above by investing in the 
next generation of renewable fuels, setting our nation on a path to 
energy independence. Was this a perfect piece of legislation? No. 
Unfortunately no piece of legislation as broad as the farm bill ever 
is. However, overall it is a good law that will benefit family farmers, 
ranchers and consumers. NFU looks forward to working with this 
Subcommittee and USDA to ensure all programs are implemented in a 
timely and efficient manner while maintaining the intent of Congress. 
Thank you for the opportunity to testify, I would be happy to answer 
any questions Committee Members may have.

    The Chairman Well, thank you very much, all of you. I want 
to share something with you and then I want to turn the chair 
over to Mr. Ellsworth momentarily. The Transportation Committee 
is marking up, and I figure that I need to be over there to 
represent you on farm to market and a few other things. So I am 
going to apologize. I have to leave, but I had nothing to do 
with the timing. Those things happen around here. But Mr. 
Ellsworth is very capable of finishing up the morning, and I 
think you are on the Committee as well, Mr. Moran, so that is 
the situation that we are confronted with. And we actually will 
let Mr. Conaway be the Ranking Member at that time in spite of 
what we said when we started out. So with that little bit of 
information, I would like to direct at least one question to 
Mr. Stallman.
    I appreciate your comments about letting family members be 
part of the operation. That is something I have been very 
concerned about, and we will continue that dialogue, as I am 
sure you will, as we talk among ourselves and with the 
Secretary and so on. But when have you been told to expect the 
rules and regulations to come out? Maybe you know something I 
don't know.
    Mr. Stallman. Well, Mr. Chairman, we don't have any 
definitive dates. When we ask, it is in process. That is 
basically the answer we get.
    The Chairman Okay. So you don't have an idea or expectation 
or ``guesstimate'' or something like that?
    Mr. Stallman. Not that I would be willing to put on the 
table.
    The Chairman Okay. Well, I don't blame you. I feel the same 
way so we will continue with that. I want to ask Mr. Ellsworth 
then to step up and take the chair, and I will go try to 
represent us on the very important documents being marked up in 
a few minutes. And, again, I thank you. I appreciate it. And we 
will continue to have an open door to every one of you as to 
the things you get concerned about. Every one of you had some 
very salient points, and we are concerned about it and let us 
continue to work together on those issues. Mr. Ellsworth, 
please. I think we will just go ahead and recognize Mr. Moran.
    Mr. Moran. Mr. Chairman, thank you very much, and I will 
join you on the Transportation Committee momentarily. Mr. 
Stallman you are actively engaged in the issues that surround 
this. Can those issues be resolved by rule and regulation or is 
there a necessity for Congress to act?
    Mr. Stallman. We think they could be resolved by rule and 
regulation. Barring that, then obviously it would take 
Congressional action.
    Mr. Moran. But the basic challenges that we face from the 
way it is being defined are rule and regulation issues, not law 
issues?
    Mr. Stallman. That is our belief, yes.
    Mr. Moran. Okay. And ACRE enrollment, Mr. Litterer, we saw 
recently a report about the small number of farmers who 
enrolled. Is that troublesome to you, expected, is this a 
matter--you indicated that you were disappointed by the lack of 
education out in the field. Do you see if this program will 
grow?
    Mr. Stallman. Well, it will grow, but I think we need to 
remind the Subcommittee that the ACRE enrollment didn't begin 
until April 27, right in the middle of planting time, so a lot 
of farmers have not had the opportunity to get in. For example, 
I will just use my personal experience. I went in Monday to our 
county office and certified my acres, which in Iowa are done by 
June 30, and then enrolled in the ACRE program. So you got two 
segments of producers out there. You have a third that haven't 
enrolled in either program, and you have \2/3\ that have 
already enrolled like I had previously, earlier in the year, in 
the direct countercyclical program and then I elected to change 
over to the ACRE program. One of the issues that I would like 
to raise here though that could be a problem here: producers 
that are already enrolled in the direct countercyclical program 
when they elect to re-enroll or enroll in the ACRE program on 
their own land it is not a problem. They can sign the papers, 
and my contract was signed and finished that day.
    The computer system worked great and everything was fine. 
For those rented acres, though, you have to take those forms 
out and have them signed by the landowners. And according to my 
office once that form is printed for ACRE that automatically 
takes them out of the direct countercyclical program option. 
And there is some fear that it will create some paperwork if 
the landowner would change his mind, doesn't want to enroll in 
the ACRE program, stay in the direct, and if they don't re-
enroll by August 14 they could be totally out of the program. 
So that is a concern that needs to be passed on here that maybe 
could be resolved.
    Mr. Moran. Thank you very much. Mr. Younggren, the NAP 
coverage, I want to spend just a minute exploring that a little 
bit further. This has been an issue particularly in--it has 
been a Kansas issue and it has been an issue with sorghum 
growers as well. Just a moment to expand upon your concerns.
    Mr. Younggren. Representative Moran, the issue with NAP 
coverage is that there is lots of confusion. The growers don't 
know what they are allowed to do. There would be an issue if 
you are a double crop county or not a double crop county, and 
it is just terribly confusing on the grower's side of what they 
are allowed to do and when or where the regulation is going to 
fall that they will still be in compliance and qualify for SURE 
in the other programs.
    Mr. Moran. A matter of uncertainty?
    Mr. Younggren. Right.
    Mr. Moran. This is digressing a bit from the topic of the 
morning but the topic of the week, and certainly the topic of 
the last couple of weeks, has been cap and trade. Rumors of an 
agreement between Mr. Peterson and Mr. Waxman, I would be 
interested in knowing from each of you if based upon what you 
now know whether you believe that the interests of agriculture 
are enhanced by this legislation or are there more positives 
than negatives in regard to the bill, as best we know what it 
may be, as we apparently are going to vote on it the day after 
tomorrow. Do the positives outweigh the negatives or the 
negatives outweigh the positives for what you know? Mr. 
Stallman.
    Mr. Stallman. First off, let me say Chairman Peterson and 
the Agriculture Committee in general did great service to 
agriculture in trying to make a terrible bill better and to 
actually have a role for agriculture beyond just the 
opportunity to pay higher energy prices. Based on what we know 
as of this morning, and we have not seen language, and we 
understand there may be some unresolved issues yet, some 
smaller ones, we would be supportive of that amendment 
certainly on the floor and think that it would improve the 
Waxman-Markey bill. Having said that, we still have very great 
concerns that are more general in nature. The first is the 
overall cost, energy cost, that that bill, we think, will 
represent to the American economy, and, more importantly, to 
agricultural producers. We are a very high energy input cost 
industry, and even with the provisions in the amendment, we do 
not think that those negatives would be outweighed by whatever 
benefits could be provided through offsets.
    We also have a great deal of concern about plugging the 
hole, as we say, in energy because the very rosy scenarios that 
were provided, the analysis of the Waxman-Markey bill by EPA 
made some grand assumptions about how much nuclear, solar, and 
wind energy would come online and how fast that would happen. 
And yet we have no policy or legislation that will actually 
make that happen. Under the current environment, we don't 
believe it will. Therefore, you will have a gap in energy and 
huge spikes in energy costs. The third issue we have is what we 
call the China Trigger, the fact that in these negotiations in 
Copenhagen that developing countries will try to get by with 
doing as little as possible. Therefore, we are taking on the 
economic burden as a country while those other countries will 
continue to do business pretty much as usual, and that creates 
a great competitiveness issue of not only for agriculture but 
for the rest of our economy.
    Mr. Moran. Thank you, Mr. Stallman. I thought you were 
going to take the easy answer and encourage me to vote for Mr. 
Peterson's amendment and stop in your answer, so I appreciate 
your continuation. Mr. Litterer.
    Mr. Litterer. Well, again, we haven't seen the specifics, 
but it does appear that Chairman Peterson made some significant 
progress in improving the possibilities for the climate change 
bill. We are going to take a look at those. Those are key. Our 
members had some principles that they had to have met, and we 
will have to see whether those are in the details. We will 
evaluate that maybe even yet today. I would also say that the 
indirect land use issue, which is part of the RFS, was 
important to us as well, and it appears that maybe it could be 
resolved as well. So, the jury is still out with us but we are 
very pleased with the progress that was made and we will have 
to see whether we can support it.
    Mr. Moran. We would welcome your answer, ultimately, your 
recommendation as to whether this is good or bad.
    Mr. Litterer. We will.
    Mr. Moran. Mr. Hardwick, any comments?
    Mr. Hardwick. Yes, sir. The counsel is doing their analysis 
of this very complicated issue as well, and the extent by which 
it impacts producers is critical to us. Truly it impacts our 
cost of production and also the offset by permits and the whole 
cap and trade concept. Would there be enough offsets to even 
take care of the permits that we might have to have? So, we are 
conducting that analysis and as we have more information we 
certainly will be ready to respond.
    Mr. Moran. Thank you, sir.
    Mr. Younggren. On behalf of the National Association of 
Wheat Growers, we appreciate the work of Chairman Peterson on 
behalf of American agriculture. At this point, we can't really 
make a recommendation. We will have to see the devil in the 
details and provide feedback later when we see the legislation.
    Mr. Moran. Mr. Johnson, you were most positive of our 
witnesses last week about cap and trade. I assume this is a 
significant improvement. Any other thoughts?
    Mr. Johnson. Certainly. Just like everyone else on the 
panel, we very much appreciate the good work that the House 
Agriculture Committee did in bringing these changes to the 
bill. Chairman Peterson certainly deserves lots of accolades 
for standing tough on this. And from what we have seen, we have 
gotten some very big improvements to this bill, some of the 
things that we thought were absolutely necessary. USDA being in 
charge of offsets was a really, really bid deal for all of us 
in agriculture. It seems like that is the case. Of course, we 
are like everyone else. We haven't seen all the language, so we 
are very encouraged by that. The indirect land use issue, of 
course, has been a concern for all of our members for some 
time. And, of course, the cost estimates have been all over the 
board. The tenor of your general question, the most recent ones 
I saw were the CBO numbers which were significantly lower than 
a lot of the other numbers that have been floating around.
    I suspect that we, at the end of the day, were certainly--I 
am sure we are going to be supportive of the amendments. I 
suspect that we will be supportive of the bill, but again we 
all need to couch our answers in terms of we want to see the 
language, but significant progress was made and the credit goes 
to Chairman Peterson and all of you who are Members of the 
Agriculture Committee.
    Mr. Moran. Thank you for your answers. I am fearful that 
the point you make about seeing the details is the same 
questions we are going to be asking on Friday if that is when 
the vote is, and the lack of analysis, the numbers, who has the 
right numbers. The time table for when this legislation is 
apparently being considered creates significant problems, and I 
worry that I as a Member of Congress on Friday will be asking 
the questions that you are asking today. Thank you, Mr. 
Chairman.
    Mr. Ellsworth [presiding.] Thank you, Mr. Moran. We have 
been informed, gentlemen, that a vote has been called. We have 
polled the Members up here, and I know that Mr. Conaway has 
some questions. Everyone else has to go to other meetings so we 
will conclude at the end with Mr. Conaway. If there is time, I 
may have a question, but I would then yield to Mr. Conaway for 
his questions.
    Mr. Conaway. Thank you, Mr. Chairman. I appreciate that. 
Involving the IRS with the audits, Bob, you mentioned audits, 
it seems to me that the IRS has the confidential data already 
on each farmer. They could run a computer program that would 
make the computations and then be able to certify those 
properly without the local office having to get copies of tax 
returns and doing all that kind of stuff. Mr. Johnson, I think 
you gave us a head nod that you are okay with a proper phase. I 
think most producers I talked to are concerned about bringing 3 
years worth of tax returns which include data beyond the 
farming operations into an FSA office and having that exposed. 
Any comments about having the IRS do the certification that 
producers either are or aren't eligible for direct payments?
    Mr. Stallman. Well, first, you are absolutely correct that 
producers are reluctant to provide documents into the local FSA 
office, for all the confidentiality reasons, for providing 
information that exceeds what is absolutely necessary to 
determine their eligibility. We believe that IRS can be a 
screener in that process. The one problem that exists is the 
definitions in terms of what constitutes farm income or not 
between the eligibility provisions and the way IRS categorizes 
data. It may be problematic. That might actually--if a producer 
is identified as having the potential to exceed those limits; 
it might actually require a professional to sit down in terms 
of an audit and review those differences in income, which may 
or may not allow the producer to be eligible even though IRS 
may flag that particular producer.
    Mr. Conaway. But those limited number of folks could be 
handled on a more discreet basis----
    Mr. Stallman. Absolutely.
    Mr. Conaway.--with professionals involved.
    Mr. Stallman. And we would suggest that should happen 
outside the county office.
    Mr. Johnson. If I could add, just because you mentioned 
where Farmers Union was on this, I think we would associate our 
comments very much with what Mr. Stallman has just indicated. 
We don't think there is a need for any of the IRS records to go 
into the FSA office. We don't think that was the intent. And I 
understand the Secretary, from visiting with him and members of 
his staff, that they are trying to work out a process whereby 
there would just be sort of a yes-no kind of a cut off that all 
the information would stay with the IRS and there would just be 
a determination.
    Mr. Conaway. Certainly the producers got to make a 
certification on their own that they qualify. That is clear. No 
problem with that. Jay, you brought in the forms that the 
producers are being asked to fill out. One of them goes through 
what is referred to as imbedded entities, which is an odd 
phrase but maybe that is known very well. It goes through like 
four or five levels of imbedded entities. What is the business 
reason for having embedded entities separate and apart from--
why would people raise their businesses that--or what are they 
trying to get at?
    Mr. Hardwick. The imbedded entities goes back to, of 
course, the 2002 Farm Bill structure coming forth to explore 
the depth of payments and who is attributed to them. And so you 
will have individuals or entities within that that need to be 
mined down to find out through the attribution process what 
those people are gaining and at what point they stop if that is 
what you are referring to. But it uncovers all people who will 
be participating in the farm operation.
    Mr. Conaway. Now is this something that you guys have been 
doing all along or is this new?
    Mr. Hardwick. Yes.
    Mr. Conaway. That was not a yes or no--I mean is this 
something you have been doing all along?
    Mr. Hardwick. Me personally?
    Mr. Conaway. No, the system.
    Mr. Hardwick. This process to sign up?
    Mr. Conaway. Well, the process of drilling down through 
five levels of imbedded entities. You have been doing that 
since 2002?
    Mr. Hardwick. Yes.
    Mr. Conaway. Okay. All right. And the reason for why you 
would arrange your businesses that way? Is there a business 
reason separate and apart from payment limits?
    Mr. Hardwick. Well, I am not sure if I understand your 
question completely, but it is the form that requests us to----
    Mr. Conaway. No, no, no. Step away from the form 
altogether. What is the business model that makes that 
efficient for you guys to raise your----
    Mr. Hardwick. Well, the business model would be, for 
example, my operation is a partnership with individuals and 
entities where they have corporations that have people within 
those corporations. So, they may be linked to other operations 
on a farm or family somewhere so they have to be identified.
    Mr. Conaway. Right, and then all of those folks would have 
to be directly involved in farming?
    Mr. Hardwick. Yes. So all people revealed and to what 
extent that they reach into other farming operations across 
families, for example.
    Mr. Conaway. I appreciate your comments about the IRS 
because I do think there is a way to get at that which we all 
want, and that is we only have qualified people participating 
in the program but not exposing producers personal information 
beyond a point that it needs to. So, we will work with the 
Chairman on trying to help the system work that way. So with 
that, I yield back.
    Mr. Ellsworth. Thank you, Mr. Conaway. Mr. Stallman, you 
spent enough time in this room, we may have to either charge 
you rent or put a bed roll under one of these chairs for you to 
sleep here, it has been so many times. I just have one final 
question on behalf of a constituent who called in just in the 
last couple days with the concern that being from Indiana with 
our wet springs we have had in the last couple of years. They 
find themselves not getting the crops in by the time the sign-
up for some of these programs is happening. I want to get your 
opinion on if the USDA had the flexibility to work around this, 
or if it is something we need to work on legislatively. I want 
to just get a quick opinion from you if that seems to be a 
problem from you and your constituents and something we need to 
be doing in the Agriculture Committee. Nobody wants that. I 
didn't ask it----
    Mr. Stallman. Just in a general sense, I mean this issue of 
a planting date and what happens when you have weather problems 
and how much flexibility there is, I don't know if I can give a 
definitive answer. I believe there would be flexibility in the 
rules or in development of rules to allow for that, but there 
has always been a question. I guess it is kind of where do you 
draw the line, and that has been an ongoing problem. Obviously, 
it is in Indiana and other states this year, but it has been a 
problem in other parts of the country in other years.
    Mr. Johnson. In North Dakota, we have dealt with these 
missed planting deadlines, it seems like way too often because 
the growing season is shorter. Sometimes you get a wet spring 
like this and the calendar just runs out. In most cases there 
are established procedures/penalties that apply if you miss 
planting deadlines, i.e., your guarantees go down with respect 
to crop insurance, those sorts of things. For every day late 
you lose a certain amount of protection. So, that is most 
appropriately handled by rule. I would think that you wouldn't 
want to get into sort of describing that in law. You need to 
have some flexibility to deal with it.
    The other thing that I would suggest is that, and it gets 
back to the SURE program that many of us talked about earlier 
in our testimony, even though there is a requirement for there 
to be year-end numbers before you ultimately determine how much 
an individual is eligible to receive under that program, we 
don't see any provision in the law and, therefore, no 
prohibition against USDA doing some sort of a partial advance 
in payments in cases where you have a significant disaster. It 
is apparent there is going to be a loss. There is no reason why 
you couldn't just do an early calculation like we have done on 
many other programs in the past and just pay out a percentage 
of that loss, and then settle up at the end of the year.
    Mr. Ellsworth. Thank you all. Again, I thank you all for 
your testimony. I apologize for the brevity of this hearing, 
again, one of those uncontrollable called votes. I would 
encourage you and all of your constituents to stay in touch 
with our Committee as we can relate those back to the full 
House. With that, under the rules of the Committee the record 
of today's hearing will remain open for 10 calendar days to 
receive additional material and supplementary written responses 
from the witnesses to any question posed by a Member. This 
hearing of the Subcommittee on General Farm Commodities and 
Risk Management is adjourned.
    [Whereupon, at 11:00 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

          Submitted Statement of American Soybean Association

    The American Soybean Association (ASA) is pleased to submit this 
statement for the record to the House Agriculture Subcommittee on 
General Farm Commodities and Risk Management public hearing to review 
of implementation of the Food, Conservation, and Energy Act of 2008. 
ASA represents 22,000 producer members on policy issues of national 
importance to all U.S. soybean farmers.
    ASA appreciates the Subcommittee's decision to review 
implementation of the 2008 Farm Bill at this time. We supported 
enactment of this important legislation last year, and are interested 
in how the new programs and changes in existing programs would be 
developed. This matter was complicated by decisions by the last 
Administration that affected implementation and have reduced the amount 
of time available to put programs and changes in place for 2009 crops.
    Pursuant to the Subcommittee's direction, ASA will not present its 
positions on a number of important issues that are addressed by other 
farm organizations with similar views. These include statements by the 
National Corn Growers Association on implementation of the ACRE 
Program, by the National Association of Wheat Growers on the new 
permanent disaster assistance program, or SURE, and by the National 
Cotton Council on changes to the payment limitation provisions of the 
2002 Farm Bill. ASA has requested to be identified as supporting the 
statements of these organizations on those issues.
    One issue we would like to bring to the attention of the 
Subcommittee and the full Committee is implementation of the Bioenergy 
Program for Advanced Biofuels, included in Section 9005 in the Energy 
Title of the farm bill. ASA played a lead role in asking Congress to 
extend the CCC Bioenergy Program which had been initiated under the 
Farm Security and Rural Investment Act of 2002, and we worked hard to 
see this Program authorized and funded.
    We understand the energy title falls under the jurisdiction of the 
Conservation, Credit, Energy, and Research Subcommittee. However, this 
issue affects the viability of soybean farmers as well as the biodiesel 
industry, and we wanted to bring it to the attention of the full 
Committee and the Subcommittee on General Farm Commodities and Risk 
Management as well.
    As Members of the Subcommittee are aware, the Rural Business-
Cooperative Service of the Department of Agriculture published a Notice 
of Contract Proposal (NOCP) in the Federal Register on June 12, 2009, 
announcing plans to implement the Bioenergy Program for Fiscal Year 
2009. ASA is pleased that the Department has moved forward to put the 
Program in place this year, and we are pleased with the overall nature 
of the Program. However, we have concerns with several provision of the 
NOCP that we would like to raise at this time.
Determination of Base Production
    ASA is concerned with the manner in which USDA would determine Base 
Production of biorefineries for 2009. Plants in operation for more than 
1 year prior to June 12, 2009, have a Base Production equal to their 
actual production during that 12 months. Base Production for 
biorefineries that began production after June 12, 2009 will be based 
on their projected production for the Fiscal Year 2009. However, for 
plants that initiated production less than 1 year before June 12, 2009, 
Base Production will be based on their nameplate capacity for a full 
year times the ``startup/shakedown factor as determined by USDA.''
    ASA supports making equal payments on actual production. These 
criteria should apply to the actual production of plants that began 
operating more than a year before June 12 and plants that began 
operating less than a year before June 12. Differentiating between 
older and newer plants using actual production versus nameplate 
capacity could seriously undercut the competitiveness of the older 
facilities and provide a windfall to the newer ones. ASA strongly urges 
the Department to reconsider this provision and revise the NOCP 
accordingly.
Base and Incremental Production
    The NOCP establishes Base Production and Incremental Production 
levels for existing and future biorefineries, and provides that 
payments for incremental production will be three times higher than for 
base production. Again, ASA has strongly supported providing the same 
payment for both base and incremental production of advanced biofuels 
under the Program.
    We believe that the role of the Bioenergy Program is to support the 
competitiveness of existing and future advanced biofuels in the 
marketplace. The sharp rise in petroleum prices in recent years 
initially made U.S. biodiesel competitive with petroleum diesel, and 
domestic biodiesel production expanded from 15 million gallons in 2002 
to 700 million gallons in 2008.
    However, rising world demand for soybeans has increased soybean oil 
prices, and petroleum prices have decreased due to lower demand 
resulting from the economic recession. Domestic biodiesel production is 
projected to fall, from 700 million gallons to approximately 350 
million gallons in 2009. Proper implementation of the expanded 
Renewable Fuel Standard (RFS2), which includes a minimum use 
requirement for biomass-based diesel, would boost demand for biodiesel. 
However, without assistance under the Bioenergy Program, we face the 
very real possibility of having a preponderance of imports meet the 
biodiesel use mandate established under RFS2.
    Argentina has positioned their soybean production industry to focus 
on biodiesel exports. Argentine biodiesel is exported through the 
benefit of an indirect government subsidy in the form of a Differential 
Export Tax (DET). Under the DET system, the Argentine Government taxes 
exports of soybeans at 30 percent of their value and soybean oil and 
meal at 25 percent of their value. However, the tax on biodiesel 
exports is only five percent of its value. This favors exports of 
soybean products over soybeans. It is no surprise that Argentine 
soybean processors have built biodiesel plants next door to their 
soybean crushing facilities, and are exporting an increasing volume of 
biodiesel to the United States. These imports previously took advantage 
of the splash and dash tax credit loophole and were largely re-exported 
to the European market. Now that the splash and dash loophole has been 
closed, the Argentine biodiesel is more likely to compete with U.S. 
biodiesel in the U.S. market. The Bioenergy Program could help U.S. 
biodiesel producers remain competitive with imports.
    Under these circumstances, it is critical for U.S. biodiesel 
producers to be treated equitably under the Bioenergy Program. To 
provide a payment three times as large on incremental production 
compared to base production would penalize domestic producers who have 
persevered and continued to operate their plants through difficult 
economic conditions. It would again undercut the competitiveness of the 
older facilities and provide a windfall to the newer ones. ASA will 
continue to work with the Department and with Congress to ensure that 
the Program is as equitable as possible for existing and new producers.
Mandatory Funding Level
    Our third concern with the NOCP is with its misstatement, under 
``Funding Information'' (June 12, 2009, Federal Register, page 28003) 
that ``Congress appropriated mandatory funding to this program as 
follows: $30 million for FY 2009.'' As Members of the Subcommittee are 
aware, the 2008 Farm Bill provides mandatory funding for the Bioenergy 
Program of $55 million in FY 2009. In response to inquiries about the 
level of funding provided for this year, the Department reportedly has 
indicated that, in its view, the full $55 million could not 
appropriately be paid out during the period remaining in the current 
fiscal year, and that it will be made available, together with the 
additional $55 million provided, in FY 2010.
    ASA is disturbed that the Department chose to misrepresent the 
decision by Congress to provide mandatory funding for the Bioenergy 
Program as an appropriation. We are also concerned by the decision to 
withhold $25 million of this mandatory funding rather than pro-rating 
payments of the entire amount among eligible biofuel producers. Unless 
these decisions can be reversed, we ask the Committee to obtain written 
assurances from the Department that the additional $25 million provided 
in the farm bill for FY 2009 will be added to the $55 million provided 
for FY 2010, and that the full amount of $80 million will be used under 
the Bioenergy Program in the coming fiscal year.
Conclusion
    Again, ASA appreciates the Subcommittee holding this hearing to 
review implementation of the 2008 Farm Bill. ASA wishes to be 
identified as supporting the statements of the National Corn Growers 
Association on implementation of the ACRE Program, the National 
Association of Wheat Growers on the new permanent disaster assistance 
program, and the National Cotton Council on changes to the payment 
limitation provisions of the 2002 Farm Bill.
    In addition to these issues, ASA asks the Committee to conduct 
active oversight of the Bioenergy Program for Advanced Biofuels to 
ensure that it is administered in a manner that is equitable for all 
producers and consistent with the intent of Congress, including using 
the full mandatory funding amounts provided in the 2008 Farm Bill.


 HEARING TO REVIEW IMPLEMENTATION OF THE FOOD, CONSERVATION, AND ENERGY
                              ACT OF 2008

                              ----------                              


                        THURSDAY, JUNE 25, 2009

                  House of Representatives,
 Subcommittee on General Farm Commodities and Risk 
                                        Management,
                                  Committee on Agriculture,
                                                   Washington, D.C.

    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Leonard 
L. Boswell [Chairman of the Subcommittee] presiding.
    Members present: Representatives Boswell, Ellsworth, 
Herseth Sandlin, Markey, Kissell, Pomeroy, Moran, and Conaway.
    Staff present: Claiborn Crain, John Konya, Scott 
Kuschmider, Clark Ogilvie, James Ryder, Rebekah Solem, Josh 
Mathis, Pelham Straughn, and Jamie Mitchell.

OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE 
                     IN CONGRESS FROM IOWA

    The Chairman I call the meeting to order, and appreciate 
our witness being here today. He has a kind of familiar look to 
him. I think I know who he is. He probably knows as much about 
the farm bill as anybody I know, and we are glad to have this 
follow-up from what we did yesterday.
    I do want to thank everybody for being here as we take this 
continuing examination of the implementation of the farm bill. 
I want to give special thanks to our witness, Under Secretary 
Miller--that has a nice ring to it--for testifying before the 
Committee, and I look forward to your insight into the current 
status of many of the new programs enacted by the farm bill.
    Everyone in this room knows what a tough process the 2008 
Farm Bill was. We expanded many programs essential to the 
safety net of our farmers and our ranchers. We also made modest 
reforms in cases such as ACRE and SURE programs. We created new 
tools for producers to manage their risk. Yesterday, as you 
probably know, we heard from a panel of witnesses representing 
major farm and commodity producer groups from across the 
country. We heard some things which USDA is doing very well, 
but we also heard about some of the obstacles producers face in 
signing up for programs and the different information many FSA 
officers are putting out. We would hope that in our process 
today we will hear from you how we are going to deal with some 
of that and I think that we will.
    I also would like to end on this point. In this country, we 
keep saying it, we keep saying it, we keep saying it and all of 
you need to do the same thing. We do have the most plentiful, 
safest and least expensive food in the world, and there is a 
reason for that because every one of us, all of you and 
everybody in Los Angeles, New York City or out in Hayes, 
Kansas, or wherever, we participate. We do subsidize our 
agriculture in different ways but we all get something for it. 
We get something big. We get the most plentiful, safest and 
least expensive food in the world, and we shouldn't do anything 
to impair that. It means something to every one of us for our 
nutrition and we all have to eat. So let us keep that process, 
education piece going. I think it is a good thing.
    [The prepared statement of Mr. Boswell follows:]

  Prepared Statement of Hon. Leonard L. Boswell, a Representative in 
                           Congress from Iowa

    I would like to thank everyone for joining me here today as we take 
a thorough examination of the implementation of the Food, Conservation, 
and Energy Act of 2008, commonly known as the farm bill. I would like 
to give a special thanks to our witness, Under Secretary Miller, for 
testifying before the Committee and I look forward to your insight into 
the current status of many of the new programs executed under the farm 
bill.
    Everyone in this room knows what a tough process the 2008 Farm Bill 
was. We expanded many programs essential to the safety net of our 
farmers and ranchers. We also made modest reforms and in cases, such as 
the ACRE and SURE program, created new tools for producers to manage 
their risk.
    Yesterday we heard from a panel of witnesses representing major 
farm and commodity producer groups from across the country. We heard 
some things which USDA was doing very well but we also heard some of 
the obstacles producers are facing in signing up for programs and the 
different information many FSA offices are putting out.
    I would just like to end on one point. The United States has the 
safest, most plentiful, and affordable food supply in the world. The 
programs in the 2008 Farm Bill help to keep it that way.
    At this time I would like to turn it over to my good friend and 
colleague, Jerry Moran from Kansas for any opening remarks he would 
like to make.

    The Chairman I am very appreciative that my good friend, 
Jerry Moran, is here. He didn't start the meeting without me 
today because he was here first, and I didn't do it to him 
yesterday so that kind of makes us even for now, but I would 
like to recognize Mr. Moran.

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

    Mr. Moran. Mr. Chairman, thank you very much. May I join 
you in your sentiments about the importance of agriculture and 
your sentiments about Mr. Miller? As I indicated with Secretary 
Miller before the hearing began, I am very pleased with his 
position at USDA and look forward to working with him. Many of 
us in agriculture appreciate his background and experience. We 
have had a long working relationship with you and believe that 
is a good thing that USDA has you in place. We are delighted to 
have you here, in what I assume is your premiere with Congress, 
and we look forward to hearing from you throughout this session 
of Congress.
    Agriculture faces tremendous challenges. Those seem to 
always be present. They don't seem to be dissipating. And we 
need your help and advice and we need some common sense at 
USDA, which I have every expectation that you will bring.
    So Mr. Chairman, I am pleased to be back today and hear our 
second panel as we look at how do we make certain that the farm 
bill that we all worked so hard on is implemented in a way that 
is advantageous to farmers and ranchers across America. Thank 
you, Mr. Chairman.
    The Chairman Thank you, and we will use our standard 
procedure as far as the other Members are concerned. We will be 
getting to you with your questions shortly and any statement 
you want to put into the record.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota

    Thank you, Chairman Boswell, and thanks also to the Ranking Member, 
Mr. Moran, for your leadership on this Subcommittee. I appreciate the 
work you have done this week for calling these hearings and examining 
the progress of Food, Conservation, and Energy Act implementation. I 
apologize for not being able to participate yesterday, but we have been 
extremely busy with climate change legislation as most everyone in here 
knows.
    I would like to welcome Mr. James Miller before this Subcommittee 
in his new role as Under Secretary for Farm and Foreign Agricultural 
Services at USDA.
    He has a busy job, not only with implementation, but as the head of 
several key USDA offices that represent a direct link to farmers and 
ranchers all across America.
    Yesterday, we heard from the major farm and producer groups who 
relayed the thoughts of our constituents in farm country, all of whom 
are depending on the timely implementation of farm bill provisions. 
While all of them commended USDA and the current Administration for 
their efforts so far, they also brought forth valid concerns about the 
work that remains to be done.
    As Under Secretary Miller no doubt knows from his time spent 
working on Capitol Hill, the implementation of farm bill provisions 
according to Congressional intent is something we follow very closely 
on both sides of the aisle. I know his office had to clean up a bit of 
a mess when it came to dealing with rulemaking from the previous 
Administration that was inconsistent with what Congress intended. 
Confusing rules on payment eligibility and the definition of ``actively 
engaged'' were points that were raised yesterday. In addition, the lack 
of movement on a permanent disaster program has created some 
uncertainty with a lot of producers.
    All of us have constituents who depend on USDA to capably carry out 
the policies set by Congress. I appreciate Under Secretary Miller's 
appearance today to tell us where USDA is at regarding implementation 
and what challenges lay ahead.
    Thank you again, Chairman Boswell and Ranking Member Moran for 
calling these hearings and for the work you have done. I yield back my 
time.

    So at this time, Secretary Miller, we would like for you to 
share what you want to share with us.

STATEMENT OF JAMES ``JIM'' W. MILLER, UNDER SECRETARY FOR FARM 
     AND FOREIGN AGRICULTURAL SERVICES, U.S. DEPARTMENT OF 
                 AGRICULTURE, WASHINGTON, D.C.

    Mr. Miller. Thank you very much, Chairman Boswell, Ranking 
Member Moran, Members of the Subcommittee. I certainly 
appreciate your opening comments concerning the importance of 
agriculture, not just to farmers and ranchers but to everyone 
that lives in this great country. It is an honor to appear 
before the Subcommittee this morning as Under Secretary for 
Farm and Foreign Agricultural Services at USDA.
    Today I would like to discuss some of the programs 
delivered by FFAS through its three agencies: the Farm Service 
Agency, Risk Management Agency and Foreign Agricultural 
Service. Specifically, I would like to take this opportunity to 
provide an update on USDA's implementation of several 
provisions of the Food, Conservation, and Energy Act of 2008, 
the 2008 Farm Bill, and I believe many of these issues are of 
great interest to this Subcommittee.
    One of my top priorities is ensuring that the 2008 Farm 
Bill is implemented as expeditiously as possible. As a farmer, 
I understand firsthand the importance of these programs and 
believe they should be implemented as Congress intended and in 
a way that protects our taxpayers' investment while at the same 
time being fair and equitable to America's farmers and 
ranchers. To move to some of the specific programs, let me 
start with payment eligibility and payment limitations. I know 
that was an issue that you heard about yesterday with the 
agricultural group panel.
    In keeping with President Obama's pledge to make government 
more transparent, inclusive and collaborative, Secretary 
Vilsack reopened the comment period for the payment eligibility 
and payment limits interim regulation. The comment period ended 
April 6. FSA received over 5,000 comments. These comments are 
currently being reviewed in order to decide what, if any, 
changes will be made in the final rule effective for the 2010 
program year. Our goal is to ensure that regulations are 
consistent with Congressional intent and are sound and fair to 
all producers.
    Moving to another issue of importance to this Subcommittee, 
USDA has also reversed the decision to terminate base acre 
eligibility on federally owned land. Without that change, 
renters of Federal land would be ineligible to participate in 
commodity programs on that acreage, so we have reversed the 
decision of the prior Administration.
    A program that is, I know, of great importance to the 
Chairman and many of the producers around the country is the 
new Average Crop Revenue Program, ACRE, and so in order to help 
farmers better manage their risks, the 2008 Farm Bill contained 
this optional revenue-based countercyclical program. Sign-up 
began on April 27, and because of the complexities of the 
program and also in part due to the lateness of the spring 
planting season, USDA extended the sign-up period until August 
14 to ensure that producers had adequate time to review this 
program and make an appropriate decision. In order to help 
producers better understand how ACRE works, FSA launched an 
educational campaign this week. In addition, producers can 
visit FSA's website and utilize the ACRE calculator. Through 
that calculator, producers are able to insert their own farm's 
production information to help them make an appropriate 
decision to determine if ACRE is a program that will benefit 
their risk management needs on their own farms.
    Turning to disaster assistance, the 2008 Farm Bill also 
created a brand-new comprehensive standing disaster program. 
One of my top priorities as Under Secretary is making sure that 
the disaster programs are implemented as quickly as possible. I 
have instructed FSA to expedite the implementation of these 
programs individually instead of waiting until all the programs 
are ready for publication before allowing sign-up for any of 
the disaster program components.
    As part of moving these programs forward as quickly as 
possible, I am pleased to announce that yesterday the Office of 
Management and Budget approved the regulations we had submitted 
for their review to implement the Livestock Indemnity Program. 
We will publish the regulations in the very near future and 
should be able to begin sign-up and start making payments to 
producers next month.
    The other two livestock-related programs, the Livestock 
Forage Program and the Emergency Livestock Assistance Program, 
are moving through our internal clearance process at USDA and 
will be sent to OMB soon. Sign-up is expected to begin later 
this summer.
    Concerning the Supplemental Revenue Assistance Program, the 
crop component of the comprehensive disaster program, those 
regulations will be published later in the year with sign-up to 
follow. So, in total we are making great progress in getting 
the disaster program implemented, although I fully realize that 
the quicker we can get these programs out to producers, the 
greater the benefit to our farmers and ranchers who will 
participate in them.
    Mr. Chairman, if I might just take a few additional 
minutes, I would like to identify a number of topics, some of 
which are probably outside the specific jurisdiction of the 
Subcommittee, but which I believe may be of interest to Members 
that the agencies in my mission area are working on concurrent 
with the implementation of the programs that I just discussed.
    First, USDA has implemented the new provisions in the 2008 
Farm Bill for the direct and countercyclical programs. We have 
published a notice of funds availability, a NOFA, for the 
Aquaculture Assistance Program contained in the economic 
stimulus legislation, and that program is being implemented and 
funds are being distributed to the states.
    We have also published a NOFA for the Collection, Harvest, 
Transportation and Storage Program under the Biomass Crop 
Assistance Program. USDA has announced a program to allow for 
the reenrollment of the most highly erodable land contained in 
expiring Conservation Reserve Program contracts. In addition, 
three components of the CRP program, as reauthorized by the 
2008 Farm Bill, those that are not subject to an environmental 
impact statement under the National Environment Policy Act, or 
NEPA, have cleared OMB and will be published in the next day or 
so. The regulations for the Farm Storage Facility Loan Program 
are being drafted concurrent with an environmental assessment 
also being required under NEPA.
    We have implemented the revised Dairy Product Price Support 
Program. USDA has already purchased over 250 million pounds of 
nonfat dry milk. Secretary Vilsack has announced that over 200 
million pounds of these government-owned stocks will be 
provided to domestic and international food assistance 
programs. USDA has also implemented the revised Milk Income 
Loss Contract Program and provided over $400 million in 
payments to dairy producers as of this date. And finally, 
consistent with our WTO commitments, we have reactivated the 
Dairy Export Incentive Program.
    Mr. Chairman, I recognize the decisions that we make in 
Washington affect the livelihood of America's farmers and 
ranchers, and I am committed to ensuring that the farm bill 
provisions within my mission area are implemented properly, 
fairly and as quickly as possible. I truly appreciate the 
opportunity to testify before you today, and I look forward to 
working with all the Members of this Subcommittee as we 
continue our hard work to ensure that USDA is responsive to the 
needs of American agriculture.
    This concludes my summary of the statement I submitted to 
the record, and I certainly will be glad to answer any 
questions you or Members of the Subcommittee may have. Thank 
you very much, Mr. Chairman.
    [The prepared statement of Mr. Miller follows:]

Prepared Statement of James ``Jim'' W. Miller, Under Secretary for Farm 
  and Foreign Agricultural Services, U.S. Department of Agriculture, 
                            Washington, D.C.

    Chairman Boswell, Ranking Member Moran and distinguished Members of 
the Subcommittee, I appreciate the opportunity to discuss the programs 
delivered by my mission area in the U.S. Department Agriculture (USDA). 
As Under Secretary for Farm and Foreign Agricultural Services (FFAS), I 
oversee three agencies: the Risk Management Agency (RMA), the Farm 
Service Agency (FSA), and the Foreign Agricultural Service (FAS). 
Specifically, I would like to take this opportunity to provide you an 
update on USDA's implementation the Title I provisions of the Food, 
Conservation, and Energy Act of 2008 (2008 Farm Bill) and other 
provisions in my mission area that are of interest to this 
Subcommittee.
2008 Farm Bill Implementation
    One of my top priorities is ensuring that the 2008 Farm Bill is 
implemented as expeditiously as possible following the intent of 
Congress as enacted in the statute. As a farmer I understand firsthand 
the importance of proper implementation of farm programs. Farm programs 
should be implemented in a way that Congress intended, protects 
taxpayer's investment, and is equitable to America's farmers and 
ranchers. As public servants we must remember that the manner we 
implement farm programs affects the livelihoods of producers.
    Some of you may remember me from my former life as a staff member 
of the Senate Budget Committee. In that capacity I have provided 
assistance to Congress as it crafted numerous pieces of legislation. 
During that time, I gained a tremendous amount of appreciation for the 
work and dedication of the Members of this Subcommittee. Your efforts 
created a farm bill that provides new options for producers to manage 
risk, strengthens our nutrition programs and expands our energy 
programs. However, this is my first time representing FFAS to discuss 
implementation of the farm bill enacted by Congress. I have been amazed 
and pleased by the dedication and expertise of the USDA employees who 
are crafting the regulations necessary to implement the 2008 Farm Bill. 
Their attention to detail and willingness to work long hours is paying 
dividends, regulations implementing the disaster assistance and other 
provisions of the farm bill are being expedited and I will talk more 
about that later.
Payment Eligibility and Payment Limits
    In keeping with President Obama's pledge to make government more 
transparent, inclusive, and collaborative, Secretary Vilsack reopened 
and extended the comment period for the payment eligibility and payment 
limits interim regulation, which was published in the Federal Register 
on December 29, 2008. Reopening this regulation allowed farmers and 
other interested parties the ability to offer input on a topic that 
affects producers across the United States. The comment period ended 
April 6, 2009 and FSA received 5,060 comments. Comments are currently 
being analyzed and a decision on what, if any, changes will be made in 
the final rule effective for 2010. The final rule will ensure that our 
policies follow Congressional intent and are sound, consistent, and 
fair to all producers.
    We also reversed the decision to terminate base acre eligibility on 
federally-owned land. Without the change, it would have resulted in 
renters of the land being ineligible to participate in Direct and 
Countercyclical Payments (DCP) or the Average Crop Revenue Election 
(ACRE) programs on that land. This would have caused an unintended 
economic impact on private operators.
Average Crop Revenue Program (ACRE)
    In order to help farmers better manage their risks, the 2008 Farm 
Bill created the Average Crop Revenue Program (ACRE) a new, optional 
revenue-based countercyclical program. Farmers are provided the choice 
between enrolling in the traditional commodity programs or ACRE. Sign-
up for ACRE began on April 27, 2009, and continues until August 14, 
2009. As of June 10, 2009, 478 farms have elected and been approved to 
participate in ACRE. Because ACRE is a new program, many producers may 
be waiting until later in the summer to decide whether to enroll.
Ten Acres or Less
    The 2008 Farm Bill eliminates direct payments, countercyclical 
payments, or ACRE payments to producers on farms with 10 base acres or 
less unless the farmer is a socially disadvantaged farmer or rancher, 
or a limited resource farmer or rancher. Last year FSA prohibited 
producers from aggregating or combining farms with fewer than 10 base 
acres using the reconstitution process, in order to create a farm with 
more than 10 acres of base; thereby making it eligible for payments.
    On November 11, 2008, FSA amended its Handbook on Policy and 
Guidance for reconstitutions to remove the restrictions that had been 
put in place prohibiting the combination of farms with fewer than 10 
acres of base. Following that amendment, farms with fewer than 10 base 
acres may be combined, provided all other rules governing 
reconstitutions are met.
Marketing Assistance Loans and Loan Deficiency Payments
    The 2008 Farm Bill contained modifications to the marketing 
assistance loan and loan deficiency payment provisions. These programs 
support eligible producers of grains, oilseeds, cotton, pulse crops, 
honey, wool and mohair. Regulations implementing these programs were 
published on April 7, 2009. New loan repayment rate provisions, 
including a mandatory option based on average market prices of the 
previous 30 days, and a discretionary option based on a 5 day moving 
average of market prices (for most commodities), were implemented on 
April 15, 2009.
Dairy
    As everybody knows, the dairy industry has been one of the hardest 
hit sectors of agriculture. Dairy producers have been caught between 
high input costs and depressed prices. For example, April 2008 milk 
prices averaged $18 per hundredweight (cwt). This spring, producers 
were receiving less than $12 per cwt. In order to provide assistance as 
quickly as possible, FSA published regulations re-authorizing the 
revised Milk Income Loss Contract (MILC) program on December 4, 2008. 
MILC compensates dairy producers when domestic milk prices fall below a 
specified level adjusted by a percentage of the national average dairy 
feed ration cost. MILC program sign-up began December 22, 2008. On 
April 1, 2009, FSA began issuing MILC program payments to dairy 
producers. As of June 11, 2009, over $405 million had been issued to 
dairy producers through the MILC program.
    In addition to MILC, USDA has purchased over 250 million pounds of 
nonfat dry milk (NDM) under the Dairy Product Price Support Program. 
Secretary Vilsack has announced that approximately 200 million pounds 
of NDM will be transferred from the Commodity Credit Corporation to 
USDA's Food and Nutrition Service for use in domestic feeding programs.
    Finally, on May 22, 2009, USDA announced the reactivation of the 
Dairy Export Incentive Program (DEIP) for the export of 150 million 
pounds of nonfat dry milk, 47 million pounds of butterfat, and 7 
million pounds of cheese. The market-disruptions caused by the 
reintroduction of dairy export subsidies by the European Union left the 
United States with little choice in order to keep our domestic dairy 
industry from being artificially displaced by EU products in certain 
key markets. DEIP was reauthorized under the 2008 Farm Bill and helps 
U.S. exporters meet prevailing world prices and encourages the 
development of international export markets in areas where U.S. dairy 
products are not competitive due to subsidized dairy products from 
other countries. Since announcement of the DEIP to date (June 12, 
2009), bonuses for the export of 16 million pounds of nonfat dry milk 
and 42,000 pounds of cheese have been awarded.
Rice
    The 2008 Farm Bill required that base acres of rice on a farm be 
apportioned or divided between long grain rice and medium grain rice. 
Owners completed their desired designations by June 1, 2009.
Planting Transferability Pilot Project (PTPP)
    A new program in the 2008 Farm Bill is the Planting Transferability 
Pilot Project (PTPP). This program permits cucumbers, green peas, lima 
beans, pumpkins, snap beans, sweet corn, and tomatoes to be planted on 
base acres enrolled in DCP or ACRE, if the crop is grown for 
processing. FSA administered sign-up for PTPP during the period of 
February 3 to March 2, 2009. As a result of the 2009 sign-up, we 
received requests for participation on 11,000 base acres. The 2010 
sign-up period for PTPP will begin on December 1, 2009 and end on March 
1, 2010.
Farm Storage Facility Loans (FSFL)
    In addition to the commodity programs contained in the 2008 Farm 
Bill, FSA also administers the Farm Storage Facility Loan Program 
(FSFL). The 2008 Farm Bill contained modifications to FSFL which 
authorized loans to be made for additional types of commodities, 
including biomass intended for biofuel production. FSA is continuing to 
make loans under the prior authorities and is developing program 
regulations to fully implement the new authorities. Currently, FSA is 
in the process of conducting an environmental assessment of FSFL under 
the National Environmental Policy Act (NEPA). Two public meetings were 
held in April 2009 as required by NEPA. The assessment is scheduled for 
completion this year.
Disaster Assistance
    One of the biggest changes in the 2008 Farm Bill is the creation of 
a standing disaster program. However, a disaster program that is not 
implemented provides no assistance. That is why one of my top 
priorities as Under Secretary is making sure that the disaster programs 
are implemented as quickly as possible.
    I have asked FSA to expedite implementation of all aspects of the 
Supplemental Agricultural Disaster Assistance provisions of the 2008 
Farm Bill. In order to implement these programs as quickly as possible, 
I have instructed FSA to implement these programs individually instead 
of waiting until all the programs are ready before allowing sign-up for 
any program. Sign-up for the three livestock-related programs--the 
Livestock Indemnity Program, Livestock Forage Program, and the 
Emergency Livestock Assistance Program--will begin soon. Sign-up for 
the Supplemental Revenue Assistance Program--the crop-focused 
counterpart to the livestock programs I just mentioned--will begin 
later in the calendar year.
    As I visit with farmers and ranchers from all parts of the United 
States who have suffered varied disasters, I fully understand the need 
to provide assistance as quickly as possible.
Crop Insurance
    In administering the Federal Crop Insurance Program, RMA has 
completed several requirements laid out by the 2008 Farm Bill, and made 
significant strides toward satisfying the rest. Several programmatic 
changes were made immediately.
    As required by the 2008 Farm Bill prior to July 1, 2008, the 
administrative and operating expense reimbursement paid to approved 
insurance providers was reduced by 2.3 percentage points, the 
Catastrophic Coverage (CAT) loss adjustment reimbursement rate was 
reduced from eight percent to six percent, and the CAT fee charged to 
producers was increased from $100 to $300. Also, in January 2009 the 
Federal Crop Insurance Corporation (FCIC) Board of Directors approved 
and implemented a new process for the submission of proposed new 
products under Section 508(h).
    RMA has contracted for studies to research and develop many of the 
programs required by the 2008 Farm Bill. These include contracts for 
crops like switchgrass and camelina, the development of a pilot program 
for sesame production, and development of a pilot program for grass 
seed production in Minnesota and North Dakota. In addition, RMA is 
currently pursuing studies to evaluate a skip-row cropping practice for 
corn and sorghum, and an apiary pilot program. Last, RMA is working on 
the price election for grain sorghum.
    RMA has awarded a contract for a study of current underwriting, 
pricing and rating (surcharge) methods applicable to organic production 
practices. The preliminary price report is due to RMA in the very near 
future. RMA is also in the process of finalizing reports related to 
ongoing evaluations and issues tied to perennial crops and declining 
Actual Production History (APH) yields.
    RMA is also preparing for the possibility of a renegotiation of the 
2011 Standard Reinsurance Agreement (SRA). The agency is currently 
examining the issues, options and alternatives that could be considered 
within the next SRA, consistent with the President's budget proposal, 
recommendations in the recent Government Accountability Office (GAO) 
report on potential savings opportunities, and guidance suggested 
within the 2008 Farm Bill. To be successful, RMA needs maximum 
flexibility in its ability to address appropriate savings opportunities 
while ensuring the integrity of the farm safety net and crop insurance 
delivery system. As provided in the 2008 Farm Bill, the Committees will 
be briefed prior to beginning negotiations.
Farm Credit
    For many struggling farmers and ranchers USDA's farm loans provide 
support to family farmers to continue farming. During economic turmoil 
these programs become even more important. USDA's farm credit programs 
provide credit when certain disadvantaged farmers and ranchers, as 
defined by statute, are unable to obtain credit from commercial 
sources.
    This year USDA has experienced loan demand increases that we have 
not seen in over 20 years. In some categories demand has increased by 
over 80 percent from last year. As of May 30, 2009, 45 percent of 
direct operating loan applications are from new customers; normally, 
this number is around 20 percent. To provide some perspective; through 
June 15th of this fiscal year we have obligated $3.15 billion; last 
year we obligated $2.44 billion during the same time period. The 
funding provided by the American Recovery and Reinvestment Act of 2009 
allowed us to provide assistance to 2,636 farmers.
    In addition to the increases in the amount of dollars obligated 
this fiscal year, there is an additional $400 million in approved 
applications that are waiting for funding. Funding provided by the 
Supplemental Appropriations Act of 2009 will allow the agency to 
provide assistance to these additional, approved applications. FSA will 
ensure that this additional funding goes to producers as soon as 
possible.
Conservation Reserve Program (CRP)
    In addition to commodity programs, disaster programs, and farm 
loans, FSA also administers the Conservation Reserve Program (CRP). The 
2008 Farm Bill included several changes to the CRP. These changes are 
scheduled to be implemented through two rules; first we will issue a 
rule that will implement new statutory provisions. This will include 
provisions addressing the expansion of eligible land for the Farmable 
Wetlands Program, the 32 million acre enrollment cap, the addition of 
cost-share payments for tree thinning, and changes to income limits for 
determining eligible producers.
    The second rule will implement those provisions that require an 
Environmental Impact Statement (EIS), including updating crop history 
eligibility to include 4 of the last 6 years between 2002 and 2007; 
exempting Conservation Reserve Enhancement Program (CREP) and 
continuous CRP acres from the county enrollment cap of 25 percent of 
cropland; transition incentives for beginning, socially disadvantaged, 
and limited resource farmers and ranchers; and routine grazing. The 
second rule is scheduled to be published when the EIS is completed.
    The 2008 Farm Bill mandated that no more than 32 million acres are 
enrolled in CRP. In 2009, 3.9 million acres of CRP are scheduled to 
expire. In an effort to maintain a vigorous CRP within the 
Congressionally mandated CRP cap, FSA is offering extensions for the 
1.5 million acres that fall within the top 30 percent of the 
environmental benefits index, or have an Erodiblility Index of 15 or 
greater. This will more tightly focus CRP on lands that truly need 
conservation assistance. Based on previous CRP extensions, 
approximately 1.2 million acres are expected to be extended for 3 to 5 
years.
    A general CRP sign-up is not scheduled for Fiscal Year 2009. 
However, producers may continue to enroll relatively small, highly 
desirable acreages, including land that is not extended, into the 
continuous CRP.
Energy
    On May 5, President Obama asked USDA to expedite the biofuels 
provisions of the energy title of the 2008 Farm Bill within 30 days, 
including the following:

   Providing loan guarantees and grants for biorefineries;

   Expediting funding to encourage biorefineries to replace the 
        use of fossil fuels in plant operations;

   Expediting funding to encourage production of next-
        generation biofuels;

   Expanding the Rural Energy for America Program; and

   Providing guidance and support for collection, harvest, 
        storage, and transportation in biomass conversion facilities.

    I am pleased to say that USDA met its 30 day deadline to help 
produce more energy from homegrown, renewable sources. The programs 
highlighted by President Obama included a component of the Biomass Crop 
Assistance Program (BCAP) a program which is under my purview. FSA rose 
to the task and developed a Notice of Funding Availability to implement 
certain provisions of BCAP for Fiscal Year 2009. The notice was 
published in the Federal Register on June 11, 2009. FSA is continuing 
with the development of regulations to permanently implement the 
program.
    The funding that was made available for BCAP provides compensation 
for the collection, harvest, storage, and transportation of biomass 
intended to meet the country's energy needs in a more sustainable 
manner. The program will provide financial assistance for delivery of 
eligible biomass material to conversion facilities that use biomass for 
heat, power, bio-based products or biofuels. FSA will provide matching 
payments for collecting, harvesting, storing and transporting eligible 
materials at a rate of $1 for each dollar per dry ton paid by a 
qualified biomass conversion facility for the biomass. The matching 
payments will not exceed $45 per ton and material providers will be 
eligible for up to 2 years of payments.
IT Stabilization/Modernization
    Aging information technology, infrastructure and equipment at FSA 
adversely impacts, and ultimately threatens the ability to reliably 
deliver fundamental services to farmers, ranchers and producers. IT 
modernization will foster applications and systems that build upon 
business process transformation to provide a faster, more secure and 
more accurate means to deliver services to our FSA customers.
    Our Stabilization initiative is adding stability to the existing IT 
infrastructure used to deliver and support FSA customers today. 
However, it also supports the modernization effort by helping to lay 
the foundation for the IT modernization that will follow.
    The combination of farm bill funding and Recovery Act funds will 
allow FSA to continue progress toward the goal of improving the 
delivery of farm program benefits, enhancing the security of producer 
information, and ensuring the integrity of taxpayer dollars used by FSA 
in support of America's farmers, ranchers and producers.
Conclusion
    I recognize the decisions that we make in Washington affect the 
livelihood of America's farmers and ranchers and I am committed to 
ensuring that the farm bill provisions under my mission area are 
implemented properly and as quickly as possible.
    I appreciate the opportunity to testify before this Subcommittee 
today, and I look forward to working with you, Mr. Chairman, Mr. 
Ranking Member, and all the Members of this Subcommittee as we continue 
our hard work to ensure that USDA is responsive to the needs of 
American agriculture. This concludes my statement. I will be glad to 
answer questions you may have.

    The Chairman Well, thank you, Mr. Secretary. When did you 
actually get into the chair as Secretary?
    Mr. Miller. I was sworn in as Under Secretary the first 
week in April.
    The Chairman I guess if we had had our choice, we would 
have him down there in January, but we didn't have a choice on 
that and I realize that Secretary Vilsack was scrambling to get 
folks like you aboard and so we are glad you are there, and I 
like what I have heard already.
    I think you answered this question, but my first one would 
be, at yesterday's hearing the testimony of Mr. Litterer as 
Chairman of the National Corn Growers was critical towards the 
Department for their efforts to train FSA employees to 
administer the new farm programs created by the bill, and I 
think I heard you say that you just recently launched a 
training program. So you might want to say more about that. In 
particular, he was concerned about the cancellation of the 
national field training. If that is what you are talking about, 
it is great. Talk to us about what is being done if you would, 
a little bit more, and how you are going to implement the 
programs and why national field training efforts have been put 
off in some cases. Where are we at on that?
    Mr. Miller. Well, let me tell you a little more fully what 
we are doing. Obviously the ACRE program being brand new and 
rather complex, because of the varying trigger points that are 
involved in that program, truly requires that individual 
producers take a hard look at the program and weigh those 
decisions as they affect their individual farms. It is quite 
likely that what may be appropriate for a farmer in one 
particular area may actually not be the best choice for even 
his neighbor. So it is really an individual choice and it 
really requires some pencil pushing by the individual 
operators. As of yesterday, we had 946 ACRE contracts signed by 
producers. That is 100 percent increase roughly over the number 
we had when I submitted my formal comments, but still, that is 
a relatively small number and is somewhat indicative of a 
couple of things: first, still a lack of understanding among 
farmers about what the ACRE program really means; and second, I 
do think that the late spring season in many parts of the 
country, particularly in big parts of the Corn Belt, have 
delayed the ability of producers to actually push the pencil on 
this program and make those decisions. That is certainly----
    The Chairman On that point, again, I appreciate what you 
just said. I was going to ask you about that next. But on that 
point, are the offices out there where they work across the 
counter and responding directly to producers, are they getting 
up to speed in your opinion, or is that a process that is on 
going? Tell us where we are on that.
    Mr. Miller. That is also a process that is on going. Again, 
the complexity for farmers is equally as great a challenge for 
our people, particularly at the county level, in terms of 
helping farmers make the correct decision without attempting to 
influence that decision. So as part of this educational 
process, not only are we reaching out to producers but we are 
also providing additional information to our county offices so 
that they can be of greater assistance as producers come in 
with questions or to sign up for that program. We have provided 
mass mailings to producers. FSA Administrator Caruso is 
actually touring the countryside, providing information to 
producers on the ACRE program. We are actually going to be 
working in conjunction with DTN to put on a webinar concerning 
the ACRE program on July 1st, and we are encouraging our county 
offices to hold meetings with producers in order to share 
experiences, determine what kinds of information are necessary, 
again, to help the producer make an appropriate decision for 
their farm. Also, our ACRE calculator, which is a relatively 
simple spreadsheet program, we think will be of great 
assistance to those stakeholders. In addition, through the 
land-grant universities and many private sector partners, a 
great deal more about ACRE is coming out every day. So again, 
we extended the sign-up date because of the complexity. We 
think this provides producers an adequate time to consider the 
ramifications of that program for their farms.
    The Chairman An interesting point; you said 946, about 
double the sign-up for ACRE. Do you have any data--you might 
have--how many of the farms or acres that were enrolled in the 
traditional direct and countercyclical program last year have 
not yet made a choice?
    Mr. Miller. Well, we have, I believe, about 1.3 million 
operations that participate in our direct and countercyclical 
programs. Under the provisions of ACRE, any of those producers 
at this point, or any point until sign-up is concluded, can 
make a decision to switch from the direct and countercyclical 
program to the ACRE program. I would expect that a large 
percentage of the 946 that have made that decision were 
previously signed up for the direct and countercyclical 
program. So they have flexibility to move into ACRE but it is 
also important for farmers to recognize that once they make 
that election, that election is permanent through the end of 
the 2008 Farm Bill, so it is an irrevocable election.
    The Chairman Okay. Thank you very much.
    Mr. Moran.
    Mr. Moran. Mr. Secretary, thank you again for being here. 
You have answered one of my questions, the Livestock Indemnity 
Program. We have been anxious for those rules and regulations 
and I appreciate the announcement that you made this morning. 
We have talked, several Subcommittee hearings ago, in regard to 
the sorghum price election. It is section 12009 of the 2008 
Farm Bill. There is a provision in there that ERS, to my 
knowledge, has not yet released the data as directed by that 
legislation, and most of the Members of this Subcommittee 
earlier sent a letter to Secretary Vilsack asking that that be 
done, and do you have a status report, an update? What is the 
holdup in providing the information required by the 2008 Farm 
Bill?
    Mr. Miller. Well, to my knowledge, the study on the sorghum 
price election is in place, and RMA is working in conjunction 
with ERS to evaluate the implications of that study and 
hopefully we will be able to report to you in the not-too-
distant future those results as we work with the sorghum 
industry.
    Mr. Moran. Am I wrong in my thinking that there is data 
that was required to be released regardless or in advance of 
that study?
    Mr. Miller. It is my understanding that it isn't a problem 
so much with the data as it is the growers' requests for ERS to 
release their model from which data would have been generated.
    Mr. Moran. The Chairman tells me that we are going to have 
an opportunity for a second round of questions. I will make 
sure you understand that is still, at least on the part of the 
sorghum growers, believed to be missing and I may come back to 
you in my second round of questions.
    The other topic I wanted to make sure I raised with you was 
related to the SURE program. We have had some real issues in 
Kansas related to SURE on failed wheat acres, the double-
cropping issue. I know that we have been in conversation with 
you about this topic, just a series of things that seem to be 
problems. Many farmers in the freeze-affected areas did not 
anticipate planting a double crop because they expected to take 
their wheat to harvest. Therefore, farmers never expected the 
need to purchase NAP insurance, and when the wheat froze, it 
was past time for NAP policies to be issued. That is one of the 
problems the farmers faced.
    The second is that they were never aware that FSA--many 
farmers were never aware that FSA approved double-cropping 
practices in counties where RMA had not done so. We have 45 
counties in Kansas that were approved by FSA but not by RMA. A 
third problem in trying to comply with the requirement to have 
insurance, even farmers that were aware of the NAP requirement 
and purchased NAP found that because of NAP's low insurance 
guarantee, purchasing a NAP policy reduced their SURE 
guarantee. It sent a signal that, therefore, because of the 
unattractive economics that they shouldn't plant a double crop.
    And finally, it seems rather clear to me that FSA is 
prohibited from selling NAP for commodities where the policy of 
crop insurance is available. My understanding is that this 
Committee staff has worked with USDA trying to find some 
solutions to the double-cropping NAP issue. I think USDA has 
rejected the suggestions. And the two questions that I would 
raise on this topic at the moment are, why is it that FSA 
continues to offer NAP policies despite what seems to be a 
prohibition against doing so, and second, will FSA issue a new 
handbook with its state offices to coordinate this double-
cropping practice with RMA?
    Mr. Miller. Well, thank you for the question, Congressman. 
Let me see if I can answer it without creating even more 
confusion over this very difficult issue, because I believe it 
is a situation where not only farmers are unaware of the 
double-cropping issue as it relates particularly to Kansas and 
Oklahoma as opposed to other more traditional double-cropping 
areas in the country. So let me first of all clarify one 
element before we get specifically into the double-cropping 
issue. In terms of those counties that are not approved for 
double cropping either by RMA or by FSA, a producer that would 
have a failed crop and plants a subsequent crop will not be 
penalized in terms of their SURE participation, assuming they 
met all of the other eligibility requirements. In other words, 
that subsequent crop in a single-crop county will be treated as 
some have characterized as a ghost crop. It will not count in 
any form or fashion. So for the vast majority of counties in 
the country and a significant number of counties in your state, 
we believe we have resolved that issue in a way that is 
extremely fair to the producers who unfortunately suffered 
significant crop loss this winter.
    As we look at the double crop situation, particularly as it 
relates to Kansas and Oklahoma, we have, again, while trying to 
follow the specific statutory language tried to find ways to 
accommodate what seems to be a unique and difficult situation 
as it relates to many of your producers. So let me go through 
where I believe we are today. First of all, when this issue was 
first raised by you and Mr. Lucas with us, we went back to the 
states and asked them to review whether the decisions to 
provide a double-cropping designation and for FSA to be able to 
provide NAP coverage on the second crops was in fact consistent 
with their authority and was appropriate for those areas, and 
those reviews will actually be ongoing. If it was determined 
that it was indeed appropriate, then what we have provided for 
within the statutory language is for producers to seek 
equitable relief from the state FSA committee. Under the 
equitable-relief provision, a producer would be able to pay the 
NAP fee even though it is well past the time that that fee 
would have to be paid in order to receive actual NAP coverage 
on that second crop, a producer would be able to pay that NAP 
fee, and while that would not make them eligible for NAP 
coverage, it would ensure their ability to participate in the 
SURE program. So just by paying the fee, producers who are in a 
double-crop county would be eligible for the SURE program. So 
that is one option that is available to them and it is our 
expectation that the vast majority of producers who seek 
equitable relief under these conditions would quite likely be 
granted that relief. But that doesn't mean that everyone is 
automatically going to be granted equitable relief and they 
will individually have to apply for it.
    In addition, as we continue to look and review this issue, 
we are concerned that we may have been in the position where we 
were offering NAP coverage through FSA in areas that really 
were not appropriate for double cropping. If that turns out to 
be the case, that would be an error that we have made, not an 
error that farmers who happen to produce crops in those 
counties made. And, we would make an appropriate adjustment as 
we look at their participation in the SURE program.
    The final option, and I believe this is an option that can 
have a great deal of benefit to your producers who in some ways 
feel that they have kind of been trapped into a situation which 
they didn't even realize existed; is, we will allow producers 
on an individual basis to once again seek equitable relief if 
they can demonstrate that even though they may be in a 
designated crop area, they do not have a history of double 
cropping. And I mean double cropping in the sense that 
traditionally they would plant, for instance, a wheat crop and 
in that same crop year would traditionally plant a second crop 
such as sorghum following the wheat harvest. So a producer in 
one of those areas that planted a wheat crop, it failed and he 
subsequently planted sorghum or some other crop and could 
demonstrate that he did not have a history of double cropping 
can again seek equitable relief and on an individual case-by-
case basis. We will review those decisions and could 
potentially provide that grower relief so that his subsequent 
crop again is treated as a so-called ghost crop.
    Mr. Moran. I appreciate your response and I may follow up 
with a couple of questions if I get a second opportunity for 
questioning. Thank you, sir.
    Mr. Miller. Thank you.
    The Chairman This is a good discussion. The chair would 
like to recognize the gentleman from North Carolina, Mr. 
Kissell.
    Mr. Kissell. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, for being here today.
    This is my rookie time in Congress and one of the first 
issues that came up, and the Chairman and I had an opportunity 
to talk about this this morning, was the poor state of the 
computer network in USDA and the efforts that have been made to 
improve the computers. As our discussions take place this 
morning, it is obvious that there is increasing complexity of 
communication of programs. Yet, we still have evidently a very 
old computer network that we are asking our farmers to 
communicate with and others departments to communicate with. I 
am just wondering in your time here if you have had an 
opportunity to look at this situation and any updates as to 
possibilities of how we might be able to go there.
    Mr. Miller. Congressman, you have raised an issue that is 
of great importance to this Subcommittee and to the House 
Agriculture Committee as a whole, and something that I am very 
concerned about as we attempt to efficiently and appropriately 
deliver the many programs that the Farm Service Agency is 
required under law to deliver and is tasked with making sure 
that we can get these programs out the door, get whatever 
benefits producers are eligible for to them as quickly as 
possible. Yes, we have a very serious IT problem within FSA and 
I believe those of us at the Department of Agriculture having 
worked with Members of both the House and Senate Agriculture 
Committees over the last several months have finally reached an 
agreement that we have a serious problem that is affecting the 
business that we are about. So we are taking a number of steps, 
recognizing that we are not in a situation where USDA can just 
go down to a retail outlet and buy a bunch of computers and we 
are up and running. This is a very complex situation, both in 
terms of the breadth of the responsibilities that FSA has in 
terms of the complexity of the programs that we administer, and 
certainly in terms of the increasing security needs that we 
have as a government agency in protecting what really are many 
of the financial records of our producer customers.
    So let me give you a brief update as to where we stand 
right now. Our modernization program, the acronym MIDAS, really 
evolves around three goals: first, maintaining the current 
system so we are able to provide and deliver on the programs 
that are under the responsibility of FSA, and that is taking an 
increase in investment. We are dealing with a system that is at 
least 20 years old, a system that already has had a record of 
failing from time to time. But we are not going to be able to 
implement a brand-new system overnight so we have to maintain 
that system, we have to be able to deliver on our 
responsibilities that we have to today, and we are working very 
hard to ensure that we are capable of doing that. The second 
component is stabilization of the existing system. As I 
indicated, we have collected a significant amount of data from 
producers over the years that is critical as we move forward 
with existing and new programs that Congress or the Department 
may implement. One thing we can ill afford to do is lose the 
ability to access that data as we move forward with a new 
system, and at the same time, again, we need to ensure that we 
can protect the security of that data. So that is the 
stabilization component. And then the third component is 
developing the software as well as providing our offices with 
the appropriate hardware in order to implement a new system. 
This all has a significant cost that will be requiring 
appropriations over a number of years. We estimate that the 
total cost of maintaining the current system, the stabilization 
component and implementing a new system will be approximately 
$450 million. The Recovery Act provided $50 million toward that 
effort, and we have already obligated about $6.5 million and we 
do expect to obligate the balance of those funds toward 
ensuring that we are making headway in creating a new system. 
In order to break down that Recovery Act spending, about $31 
million will be used to upgrade and improve the capacity, the 
reliability and the performance of the web-based program 
delivery system that we have now, about $19 million is going to 
be used to help streamline FSA's business processes and develop 
an effective, long-term IT system.
    In addition to that and for the first time, President Obama 
in his budget submission to Congress provided for an additional 
$67.3 million toward accomplishing these same goals, so I 
believe the Administration and Congress now for the first time 
are truly on the same page. I think we can make significant 
headway. We certainly look forward to working with the Members 
of the Subcommittee as the system continues to evolve. But, we 
all recognize not only is there a great need to do this but as 
we look forward to the future, it is critical for our farmers 
and ranchers; it is critical for USDA in terms of ensuring its 
ability to deliver programs appropriately that we do not see 
this process stalled in any way; that we continue to make 
progress year to year with the goal of getting a brand-new 
system implemented within a reasonable amount of time and 
implemented in a way that we reflect the 21st century both in 
terms of our constituents, our stakeholders' ability to access 
the various services and programs that FSA provides; and also 
the ability to streamline many of our management and program 
processes throughout USDA including a system where we can share 
information with the Risk Management Agency in an effective 
manner, where we can share information with the NRCS and any 
other agency that has implications for our stakeholders and in 
effect cuts across a number of agency responsibilities.
    Mr. Kissell. Thank you. Mr. Chairman, just one real quick 
question. If you have all the resources you need, any estimate 
of the time--how long it would take--to get to a reasonably 
good network?
    Mr. Miller. Let me turn to my staff and see if they have 
any ballpark figure. I do not, Congressman.
    The Chairman Why don't we just hold on that one, Larry, 
just for a second and let him do that. On the issue, Mr. 
Secretary, let your staff talk about that a minute, but you hit 
a key point, because where you have been and what you have done 
that this Committee has recommended in the farm bill, as well 
as the stimulus package to get something going here, and it 
goes back to all of us, as we all have this vested interest we 
talk about in food that I don't want to take the time to 
repeat. But, when we have FSA and NRCS can't talk to each other 
by computer, this is absurd, and it really puts a big barrier 
in the road and then getting information out, and what you just 
said, very appropriately, about having the confidence of the 
producers to share all that information. We have to get this 
upgraded and it has cost a lot of money, but it is not going to 
get cheaper and it has a tremendous impact on our ability to do 
what we do in agriculture to feed everybody. So, a great 
question, Mr. Kissell, and if you have answer to that least 
piece now, go ahead and give it, then we will move on.
    Mr. Miller. Thank you, Mr. Chairman. Congressman, currently 
we are short about $254 million of completing the project, 
which we expect is going to take 3 to 4 years to finalize. So, 
yes, we are going to need additional resources and it is, as 
the Chairman indicated, not an insignificant amount of money. I 
believe in the longer term, and I am not sure the longer term 
is necessarily that far away because we needed really to do 
this years ago, but in the longer term this will provide 
significant benefits to our stakeholders, and in addition, 
certainly improve the level of efficiency and program delivery 
at the Department. I think it is an investment that is well 
worthwhile and certainly we, again, look forward to consulting 
with you on a regular basis in terms of the progress that we 
are making. I should note that our Chief Information Officer at 
FAS brings a wealth of experience from the private sector and 
is truly a very important asset as we move forward with what is 
a very significant IT modernization program. So I am confident 
we can do it. I am confident that the benefits will be 
significant once we get this process done, but again, we are 
going to need to continue to work very closely together to 
ensure that the resources are in fact made available as they 
are needed so we don't impede this progress.
    The Chairman Well, on that point, before we move on to Mr. 
Conaway, your last statement is very key, and I am going to ask 
you, and I know you will, I know you, you have to work up your 
chain to OMB and we have to keep ours going, and I know our 
Chairman is all for it and I know the Ranking Members are for 
it. We can't keep putting this off, and with the other things 
we have been doing, we can surely do this because it affects 
every man, woman and child in the country, when it comes right 
down to it. So we are with you on it, and if there is something 
we need to do different than we are, tell us and let us work 
together and let us see if we can't crank it up a little bit. 
Because, as you have said in another way, we should have done 
this yesterday, and so we are just going to press on and it is 
a big one.
    I would like now to recognize the gentleman from Texas, Mr. 
Conaway.
    Mr. Conaway. Thank you, Mr. Chairman.
    Mr. Miller, welcome to the team. I have two or three little 
nits and nats and then I want to talk about the broader 
subject. Yesterday during the hearing we had a gentleman 
testify, and I wasn't able to flush out what he meant but he 
said that if a tenant went into an FSA office to sign up for 
ACRE and the forms were printed to do that, that he needed to 
go have the owner sign or other folks, that that somehow locked 
up the system arbitrarily, and like I said, I don't understand. 
If you wouldn't mind getting your staff to check into that 
testimony yesterday and pull that in because barriers to ACRE 
sign-up is not something that we ought to be promoting. So if 
you could commit to checking on that testimony from yesterday 
and flushing that out?
    Mr. Miller. Sure.
    Mr. Conaway. I apologize for not knowing more about it.
    Under the SURE program, as you look at defining farms, the 
share-rent landlord-tenant farms, if you wouldn't consider 
giving them the same kind of treatment that the partnership 
would get. This is going to be a little different than what FSA 
has looked at, but this is a new program and we may have an 
opportunity to improve it by looking at a broader definition of 
farm than would normally be there.
    The other concern under SURE is the pricing for certain 
crops like peanuts that have an arbitrary price that their 
overall prices may be inverted from what the SURE could pay 
out, and so looking at ways within your discretion or USDA's 
discretion at making modifications to the prices with the 
various crops to make sure that SURE is in fact an umbrella 
policy that does work on the process.
    And then in a broader context, given that you are writing a 
lot of new regulations, there is always this tension between 
legislative intent, our interpretation of what legislative 
intent was and your interpretation of what legislative intent 
was and how do we reconcile, how do we maintain an open 
dialogue between us so that we get to the right answer with 
respect to what the intent was last year when was passed this 
bill. So if you could probably speak, just a couple comments on 
the SURE thing and then spend the rest of your time on this 
legislative intent issue.
    Mr. Miller. Well, thank you, Mr. Conaway. Concerning the 
SURE definition of a farm, we believe the statute is actually 
pretty clear on how we should define a farm. It is a whole farm 
program that covers a producer or a landlord's farming 
operations in all counties, in all states and it is a revenue 
program. So it is indeed possible that you could have a 
situation where an operator who may have multiple farms and 
multiple landlords could be eligible for a SURE payment because 
his whole farm revenue was reduced due to natural disasters, 
while any individual landlord because their portion of that 
more aggregate farming operation did not suffer a loss. So we 
believe the intent of Congress in the statute is relatively 
clear in that regard.
    In terms of SURE prices, we certainly are going to do the 
best job we possibly can to determine what is the national 
average market price for the year, and of course, that means 
that the final determination of SURE benefits will effectively 
be delayed until the end of the marketing year for the crops 
that a producer has. In the case of peanuts, both for the 
peanut program and then prospectively as well as for the SURE 
program, we are beginning to collect NASS data on peanut 
pricing. We believe that will aid us in ensuring that we can 
adequately reflect the prices for peanuts throughout the 
country.
    I think you raised a very good point concerning legislative 
intent, and I can tell you as a former staff member in Congress 
and I can also emphasize that the Secretary agrees that it is 
extremely important, as we implement these programs that we do 
the best possible job to reflect Congressional intent as it is 
contained in the statute. In my view, that means in those areas 
where there may be questions, we need to continue our 
consultation with Congress and we certainly are prepared to do 
so. I can pledge to you that I or my staff are willing to 
engage in those discussions at any time, any place, whether it 
is on an individual basis or formally or informally with 
Members of the Agriculture Committee. It is critically 
important that we do continue to work together, that we have a 
good understanding of what these programs mean, even in those 
instances where we may in fact disagree.
    Mr. Conaway. Well, Mr. Miller, thank you. I appreciate that 
pledge, and we will pledge it as well on our side of the table. 
I do think you bring an interesting perspective to the table, 
having worked on our side of the table from that and you may 
have a little more sensitivity to our angst than someone who 
has not been in the Legislative Branch. So I appreciate that 
pledge and I look forward to working with you and your staff.
    Mr. Chairman, I yield back.
    The Chairman Another good discussion. Thank you.
    The chair would now like to recognize the gentlelady from 
South Dakota, Ms. Herseth Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman, and thank 
you, Under Secretary Miller. I want to thank you too for the 
opportunity we had to visit a few weeks ago and emphasize how 
important the President's disaster declaration is to the 14 
counties in South Dakota that had suffered late blizzards and 
livestock losses, as well as flooding in the northeastern part 
of the state as well.
    I would like to seek a little bit of clarification from 
your written testimony. I know that you have specifically 
mentioned the Livestock Indemnity Program. Now, did you state 
that next month payments would start being made out of that 
program, or that the rules would be finalized and sign-up would 
begin?
    Mr. Miller. Congresswoman, my oral testimony is an update 
over the formal testimony that was submitted. Yesterday OMB 
cleared the Livestock Indemnity Program. We will be publishing 
the rule over the next few days and we will be prepared to 
engage in sign-up and make payments to eligible producers in 
July.
    Ms. Herseth Sandlin. And the eligibility will include those 
who may have experienced losses this past spring and winter?
    Mr. Miller. The eligibility will include those who have 
experienced death losses under the program, yes, over the 2008 
and 2009 years. They will of course need to bring in 
information to validate those claims, but again we are 
certainly pleased that we were able to get this program in the 
position where we can start providing assistance as quickly as 
possible.
    Ms. Herseth Sandlin. We appreciate that update, and as we 
have been waiting to determine when the rules would be 
finalized, we have encouraged producers to fully document those 
losses. Just so you know, we have farmers and ranchers where 
losses are at, what we estimate $25 million, and the general 
estimate for livestock losses ranges as high as 15 to 20 
percent in some areas. So heavy losses, just to put that on 
your radar in terms of what happened in western South Dakota 
this spring.
    Could you also provide similar updates for the Livestock 
Forage Program and the Emergency Livestock Assistance Program?
    Mr. Miller. Those two programs are currently in the USDA 
review process. While we initially separated them to begin 
developing the regulations, we now are combining them back 
together to finalize the review. We think we are in reasonably 
good shape within USDA in terms of completing that review in 
the not-too-distant future. At that point once we have 
finalized our activities, then that will also need to go to OMB 
for its review and we are extremely hopeful that we can get 
that program in position to be implemented later this summer.
    Ms. Herseth Sandlin. Okay. We appreciate your efforts there 
to move as quickly as possible in light of coming onboard this 
spring.
    Just to follow up, and I apologize, I was in and out so 
maybe this question was more specifically asked; but I know 
that Mr. Boswell, Chairman Boswell and the Ranking Member asked 
some questions about ACRE. Were you asked, do you have a 
specific reaction or opinion on the National Corn Growers 
Association proposal that they set forth yesterday in their 
testimony about modifying sign-up procedures? And we certainly 
appreciate extending the deadline for the sign-up, but the 
whole issue of allowing producers and landowners interested in 
ACRE to file an intention to elect to enroll in ACRE. Would you 
support either that type of modification, or are you discussing 
any other types of modifications to the procedures to deal with 
some of the concerns about the complexity? And while the 
calculator appears to be working well, it does require some 
training and sophistication to use it appropriately.
    Mr. Miller. Well, we certainly appreciate the complexity of 
the program and the need to provide producers adequate 
opportunity to fully weigh their options whether they wish to 
participate in the traditional direct and countercyclical 
programs or decide to enter into an ACRE contract. I think it 
is a bit premature to be talking about further extension of the 
sign-up date, but certainly as we get closer to that August 
14th date, if we at that point determine that producers still 
have not had an adequate amount of time, that is something that 
we would need to consider. I should mention, however, that an 
extension, further extension of sign-up for ACRE will probably 
result in an additional cost to the Department. So, obviously 
balancing our budget concerns with being able to ensure 
producers have adequate opportunity to sign up for the program 
is difficult in this environment. I do believe that the ACRE 
education program that FSA is currently engaged in will be of 
great benefit to producers both in terms of helping them 
understand the intricacies of the program because it is 
complex, and also I believe it will help to at least promote 
the idea that producers should take a good hard look at the 
ACRE program. For some it will be a very appropriate risk 
management tool and potentially provide them greater levels of 
economic security than the traditional program. That will not 
be the case for all producers certainly.
    Ms. Herseth Sandlin. I appreciate your responses and that 
you will monitor it as we get closer to August 14, and I want 
to share your optimism that over the course of the upcoming 
weeks that that type of information sharing will answer a lot 
of the questions that remain for a number of producers, as it 
relates to participation. It is an irrevocable decision, as you 
mentioned, over the course of this farm bill in the upcoming 
weeks. I am out of time and I need to head down the hall to the 
Natural Resources Committee that is also having a hearing, but 
I am going to submit a question to you in writing with regard 
to CRP and to the State Acres for Wildlife Enhancement Program 
and some South Dakota-specific issues that we are dealing with 
there. I look forward to discussing those issues with you at 
greater length. Thank you.
    Mr. Miller. I look forward to your questions and we will 
respond to them as quickly as we possibly can.
    Ms. Herseth Sandlin. Thank you.
    Mr. Miller. Thank you.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman.
    The Chairman Thank you.
    The chair now recognizes the gentlelady from Colorado, Ms. 
Markey.
    Ms. Markey. Thank you, Mr. Chairman. Thank you, Mr. Miller.
    I wanted to talk a little bit about the crop insurance 
program. You mentioned in your testimony that right now you are 
evaluating the skip-row cropping practices for corn and 
sorghum. I know that is important for several producers in my 
area, as well, and they have been trying to work with RMA to be 
compensated for that. I mean, it is a practice where in 
Colorado every drop of water counts. So if you could talk a 
little bit about where you are on that study.
    And then the second part of it, you also mentioned that RMA 
recently contracted for a study of pricing and rating for 
organic production practices. I am interested in that and also 
on any studies you are looking at for providing RMA services of 
compensation for fresh fruits and vegetables as well. So if you 
can talk about those two issues?
    Mr. Miller. Concerning skip row, we are evaluating a number 
of proposals, and no determination has been made concerning 
that but it is in the process. We will give it a very serious 
look.
    In terms of the expansion of crop insurance, particularly 
as it relates to specialty crops, as I think everyone in this 
room is aware, we have seen a substantial increase in the use 
of the various crop insurance risk management tools that have 
been made available. RMA, in cooperation with the private 
insurance companies and others such as farm organizations and 
program developers, have made significant strides in terms of 
program expansion. Not only have the number of acres and the 
amount of liability that is covered by the crop insurance 
program increased dramatically in recent years, but the breadth 
of those programs in terms of covering new crops has also 
expanded significantly. However, as we look at expansion 
particularly to crops in which there is not a significantly 
large acreage or a market that is transparent, it becomes 
increasingly more difficult to design programs that are 
actuarially sound. And so that is certainly an issue that RMA 
takes very seriously, but, again, we have been very aggressive 
in terms of trying to review new proposals. We have submitted 
any number of proposals to expert review panels; and certainly 
as opportunities come to provide new risk management tools to 
our producers that can be a benefit to them, and that are 
actuarially sound, that we can price appropriately. We will be 
prepared to make those offerings either as pilot programs 
initially with the goal of, hopefully, making those types of 
programs available nationally.
    On the organic issue, we do expect the price election 
report to be available in July, so we are making headway in 
that regard.
    Ms. Markey. Thank you very much. Thank you, Mr. Chairman.
    The Chairman My Ranking Member and I, we had a very 
important discussion while you were asked your questions. Did 
you mention in that, did you ask was there a place for the 
producers to participate in this?
    Ms. Markey. You know, I didn't. That is a good point. If 
there is a role for the producers to participate----
    The Chairman Well, in a recent hearing they indicated 
interest in it, Mr. Secretary, and I just wondered if you 
raised that question because I got sidetracked a little bit. Is 
there a role for farmers in helping the USDA to prepare for 
negotiations as we think about the re-insurance and so on?
    Mr. Miller. Yes, there is. The negotiations technically are 
between the Risk Management Agency and the private insurance 
companies. This is in a way a contractual negotiation. So in 
terms of official representation at the negotiating sessions, 
it is between those two parties. However, we do have an open-
door policy----
    The Chairman So you would listen to what they--okay.
    Mr. Miller. We have invited them. They have been in my 
office. I know they have spent significant time at RMA's 
office, and not just the producers but agents and literally 
anyone else that has significant interest in the crop insurance 
program. We welcome their comments and their input as we enter 
into these negotiations.
    The Chairman I appreciate that.
    Ms. Markey. Let me just follow up. I do have several 
producers in southeast Colorado who have been working pretty 
closely with RMA about skip-row practices because they are the 
ones who are doing it. You know, they have the data, so I think 
that they have a pretty good working relationship with RMA and 
that is important because they are obviously the ones on the 
ground.
    Mr. Miller. I completely agree with you, and certainly the 
growers will have every opportunity to provide their input to 
provide data that can help us develop a program that can meet 
their needs.
    Ms. Markey. Thank you.
    The Chairman Thank you, Ms. Markey. That was an excellent 
discussion. That is part of our responsibility. As you know, 
Mr. Secretary, this Committee has oversight and so on and we 
haven't forgotten about that. We have just been busy as you 
have, and that will be coming along at some point in time. We 
are going to have a second round if we can and I would like to, 
since I got involved in both Mr. Kissell's and Ms. Markey's 
discussion, I will yield immediately to my Ranking Member.
    Mr. Moran. Mr. Chairman, thank you. I appreciate the 
opportunity to continue our discussion with the Secretary. I 
have an additional question but mostly this is follow-up. First 
of all, in regard to the SURE issues that I raised in regard to 
failed wheat acres, double cropping, I don't think you 
responded to my assertion that USDA has to overcome a statutory 
prohibition against issuing NAP policies when the underlying 
commodity is eligible for crop insurance. Is my assertion just 
wrong? I think we have made the argument to USDA that you do 
not have the authority to issue those NAP policies to begin 
with.
    Mr. Miller. If a crop insurance policy is available on a 
crop, we certainly should not be engaged in issuing NAP 
coverage. So if CAT or any other type of buy-up policy is 
available, then a producer would not be eligible to purchase 
NAP coverage.
    Mr. Moran. And USDA is abiding by that?
    Mr. Miller. We believe we are.
    Mr. Moran. And second, in regard to that same topic, you 
talked about the opportunities for equitable relief. What is 
the time frame--I don't think we have a state committee in 
place or a state director. What is the time frame in which 
those appointments will be made and equitable relief becomes a 
real opportunity?
    Mr. Miller. Well, that is an excellent question and----
    Mr. Moran. And I would be glad to have you direct it 
specifically to Kansas.
    Mr. Miller. It is an excellent question, and one that has 
been posed by a number of people that have come through my 
office recently, and quite frankly one that I pose almost every 
day at the Department. Let me answer it this way. We are very 
close to announcing a significant number, not all, but a 
significant number of the state executive directors for FSA as 
well as state rural development directors. And when I say very 
close, I am hopeful that within a matter of days rather than 
within a matter of weeks. There are others in which the vetting 
process has not been completed yet so that may be delayed. I 
can't tell you specifically where we are in terms of Kansas at 
this moment, Congressman.
    Mr. Moran. I was going to follow up with that, but Mr. 
Boswell wanted me to ask about Iowa.
    Mr. Miller. But I can assure you, we certainly recognize 
the importance of getting these people in place. Once they are 
in place, I am hopeful that we will be able to move 
expeditiously in naming the state committees because obviously 
they have a very significant role to play in our delivery of 
these programs.
    Mr. Moran. I talked to you about the sorghum price election 
and I want to read the statute, the language from the farm 
bill, the section 12009 that I mentioned. ``The Corporation, in 
conjunction with the Secretary . . . shall not later than 60 
days after the enactment of this paragraph, make available all 
methods and data, including data from the Economic Research 
Service used by the Corporation to develop the expected market 
prices for grain sorghum under the production and revenue-based 
plans of insurance of the Corporation.'' That is the language 
of the statute. On June 5th, this Subcommittee, or actually Mr. 
Boswell and I, the Ranking Member of the full Committee, Mr. 
Lucas, and the full Committee Chairman, Mr. Peterson, and other 
Members of the Committee wrote the Secretary of Agriculture 
reminding him that 60 days after the enactment has come and 
gone and still no response for the release of that data, and 
you indicated that you are working through the models. It is 
not the model or the conclusion that the statute requires that 
be released, it is the method and the information which is 
being fed into the model that the grain sorghum producers are 
entitled to, and the reason this is important is that without 
that information the expert reviewers who are tasked with 
developing and recommending methodology to better determine 
that price selection, that market price for grain sorghum, can 
effectuate their statutory obligation. So I am again asking 
that USDA release that information.
    Mr. Miller. Well, Congressman, first of all let me say that 
I cannot speak for the Economic Research Service. That is an 
agency that is not within my mission area. Having said that, it 
is my understanding that they are considering releasing the 
information that has been requested, and I will be happy to 
convey your comments both to ERS and once again to the 
Secretary and see if we can get this issue resolved.
    Mr. Moran. You are very good in answering that question. I 
have no greater guarantee that the information is going to be 
provided but it was a nice answer.
    And finally, I have just a few seconds left. Sign-up for 
the extensions on CRP expire, as I understand it, at the end of 
the month.
    Mr. Miller. That is correct.
    Mr. Moran. If there are less than 1.5 million acres that 
are requested for extension, is there a plan to have--maybe you 
can tell me how many acres have been requested for extension. 
That may answer the remaining part of my question about this 
topic. Is there a plan for additional sign-up if it is less 
than the 1.5?
    Mr. Miller. There is a pool of about 1.5 million acres that 
would be available for reenrollment under the Secretary's 
announcement, so we certainly--I think reasonably--would not 
expect that every one of those acres would necessarily be 
enrolled.
    Mr. Moran. Do you expect more applications than available 
acres?
    Mr. Miller. We expect that the reenrollment contracts will 
be smaller than the total pool of acres that are available 
because we have defined--the 1.5 million acres that are 
available for reentry are those acres in expiring contracts 
that meet the conditions that we have established in the 
reenrollment program. They are the most highly erodable acres 
contained in those expiring contracts. So the number of acres 
that will be enrolled naturally could not exceed that 1.5 
million acres, and quite likely will be somewhat less. At this 
point we do not know how many acres will be enrolled. In some 
ways I believe the late spring, and quite frankly, our 
announcement was not made available until the latter part of 
May in terms of the reenrollment opportunity, so I expect that 
there are a number of producers out there that have eligible 
acres that are still weighing that decision. We will need to 
wait until we get closer to the end of the sign-up period to 
have a better handle on the number of acres. I would say that 
at this point there are certainly no plans for a general CRP 
sign-up for 2009, but certainly farmers can engage in the 
continuous sign-up program at any time during the year and that 
includes acres that are available under expiring contracts but 
not eligible to reenroll.
    Mr. Moran. Have you established a date for a general sign-
up?
    Mr. Miller. We have not established a date for a general 
sign-up.
    Mr. Moran. Do you know if one will occur in 2010?
    Mr. Miller. That is something that we will certainly 
consider because as we recognize that once again we will have a 
number of contracts that will be expiring in 2010, and that is 
a decision that we will be considering later in the year.
    Mr. Moran. Does a general sign-up require a NEPA analysis?
    Mr. Miller. I believe after we implement the CRP 
regulations for which the new CRP regulations that were 
contained in the 2008 Farm Bill and those regulations do 
require an environmental impact statement. I believe once we 
have concluded that, then we would be able to go ahead and sign 
up new acres in CRP.
    Mr. Moran. Thank you very much. In an attempt to be 
gentlemanly and somewhat clever, I do want you to know I was 
not intending to let you off the book on answering the sorghum 
question. While I want to be friendly about it, I still intend 
to be insistent as I can be that USDA and the Corporation 
comply with the directive of farm bill.
    Mr. Miller. I wouldn't expect anything less, Congressman.
    Mr. Moran. Thank you very much. Thank you, Mr. Chairman.
    The Chairman You are very welcome, and I will just say, Mr. 
Secretary, I have known this man. We came here together and he 
is not going to let up.
    That was a good dialogue, and I appreciate that. This has 
been excellent. We have been joined by the gentleman from 
Indiana, Mr. Ellsworth. We recognize him at this time.
    Mr. Ellsworth. Thank you, Mr. Chairman, and I apologize. 
They double booked me for hearings today, and, Mr. Miller, I 
apologize. If you have answered this already, I hope you won't 
mind answering it again. I noticed on page six of your 
testimony you talked about the farm flex, the Planting 
Transferability Pilot Project, that only 11,000 acres had been 
applied for when I believe that 76,000 are available. I 
wouldn't guess you have that at your fingertips what states and 
the areas the 11,000 acres have been applied for, but if I can 
get that from you or someone on your staff. And do you have any 
anticipation why that has occurred, if there are 76,000 
available, why only 11,000 were taken advantage of?
    Mr. Miller. Well, Congressman, this is a program that was 
greatly expanded in the 2008 Farm Bill to cover a much larger 
range of crops. The data that I have for 2009 indicates that 
Indiana had 9,000 acres potentially available for the planting 
flexibility program and of that 9,000 acres, producers have 
signed up for 2,610 acres. You are correct that we have just 
over 11,000 acres signed up in the program, but again this is a 
producer choice. It really reflects the decisions that they 
make concerning how they view their economic prospects from 
raising a traditional program crop on those acres versus their 
potential economic gains from raising one of the eligible 
specialty crops for processing. So that acreage is committed 
for this year. Producers will have another opportunity to weigh 
that program next year.
    Mr. Ellsworth. Do you figure it might have been that it was 
just brand new, fresh with the new farm bill and then this year 
there might be more taking advantage of it, or any gut feeling 
for that?
    Mr. Miller. Well, my gut feeling is that both producers as 
well as the processing industry for those eligible commodities 
will probably be evaluating their needs as we look forward to 
2010, and so certainly the amount of acreage could change both 
in terms of the aggregate amount of acres that are signed up. 
Certainly, the amount of acres that may be signed up in any one 
state vary, because there are some differences between the 
states in terms of the eligible commodities that are produced.
    Mr. Ellsworth. Okay. Thank you very much. That is all I 
have.
    Mr. Miller. Thank you, Congressman.
    Mr. Ellsworth. Mr. Chairman, I yield back.
    The Chairman Well, thank you. That was a good discussion 
and it was on my list, so you took care of that.
    Mr. Kissell.
    Mr. Kissell. Thank you, Mr. Chairman, and Mr. Miller, this 
is more of a request and it comes at the very edge of the 
oversight of this Committee and your mission area, but it 
follows up a little bit with what we talked about earlier with 
the computer programs. When Secretary Vilsack was here a couple 
weeks ago, we spent some time talking about rural broadband and 
pending release of monies towards that. We also talked about 
some definitions that we would be very interested in, what 
would define rural, what would define underserved to get an 
idea as to what areas this rural broadband would be going. It 
was mentioned to me yesterday in a completely different 
conversation with other people that that is still pending, and 
I believe the dates are coming up. If you could pass along that 
to my knowledge that we have not gotten those definitions back 
and certainly this is important to our rural areas and it would 
be important towards the upgrade of the computer programs we 
talked about. So if you have any insights on that, I certainly 
would be appreciative, but if not, if you could certainly pass 
on to the people that to my knowledge we are still waiting on 
those definitions.
    Mr. Miller. Mr. Kissell, I will be more than happy to 
convey that message to the Secretary's office as well as to the 
Under Secretary for Rural Development where the focus of that 
program lies, so we will make sure that your message is 
conveyed to them.
    The Chairman Thank you. Mr. Pomeroy.
    Mr. Pomeroy. Thank you for holding this hearing, Mr. 
Chairman. I want to talk about how proud I am that Mr. Jim 
Miller is Under Secretary of Agriculture for Farm and Foreign 
Agriculture Services. The first time I got to know Mr. Miller, 
he was a wheat farmer in eastern Washington, and since that 
time I have seen him working in various iterations, most 
notably including the National Farmers Union Policy Director 
and Senator Kent Conrad's ag expert. I watched him as the 
principals met and worked out the final provisions of the farm 
bill. Jim Miller's counsel to Senator Conrad is directly 
responsible for many of the very provisions of the farm bill he 
is now charged with implementing so this is all to the good. 
You know, we pass stuff, it goes down to USDA. Sometimes it 
comes out in forms not to be recognized. Here we have a guy 
that actually was involved on one end of Pennsylvania Avenue 
and right now down at the other end implementing it, 
Independence Avenue, I guess I should say, and we are very, 
very pleased to have him there.
    Mr. Miller. Thank you, Mr. Pomeroy.
    Mr. Pomeroy. A couple of questions, Jim, Mr. Secretary: 
With regard to the disaster programs, SURE and livestock 
programs, when are we going to look at sign-up?
    Mr. Miller. Mr. Pomeroy, as I announced earlier----
    Mr. Pomeroy. I apologize.
    Mr. Miller.--yesterday the Office of Management and Budget 
cleared our regulations for the Livestock Indemnity Program so 
we will be publishing that program over the next few days and 
we expect to be able to begin sign-up and make payments in 
July.
    Mr. Pomeroy. Do you have the requisite staff to handle 
that?
    Mr. Miller. We believe we do. Obviously the implementation 
of all of these programs, and there are a number of them, are 
going to create a burden on our county offices in particular. 
They are the people that are on the front lines. But I can tell 
you my experience, both as a farmer for over 20 years and then 
since I have been in Washington, I don't think that there is a 
group of people in the country that are more dedicated to the 
success of agriculture than the folks that man our county FSA 
offices. So I am confident that they will do everything 
possible to be able to implement this program and get the 
assistance to farmers in as expeditious a manner as possible.
    Mr. Pomeroy. I agree with that assessment of your field 
staff. They are tremendous. In your very first day as Under 
Secretary in the State of North Dakota we are looking at the 
horrible disaster losses we were racking up during the spring 
floodings and following the record snowfalls that we have had, 
we lost a lot of calves. How will the valuation of calves take 
place under this Livestock Indemnity Program?
    Mr. Miller. We have--in the regulation, we will have 
established a fixed value for the various types of livestock 
that are eligible. I think once you see the rule as it is 
published, we believe that we are treating those producers very 
fairly in terms of a recognition of the value of a newborn calf 
and many of the losses in the northern plains occurred right in 
the midst of calving season. So we believe we have provided a 
fair payment rate for those eligible producers and we certainly 
look forward to getting the benefits to them as quickly as we 
can. We certainly understand the problems that they are facing.
    Mr. Pomeroy. A day-old calf has one level of value, a cow/
calf pair has a different dimension of value, reflecting more 
the economic opportunity of that asset to the farmer.
    Mr. Miller. And that is exactly some of the issues that 
weighed in our consideration of what value to put on them, that 
we certainly know that a calf is not produced to go to market 
immediately, that a producer does expect to gain some economic 
value. So, again, we have found a way to provide a valuation 
for those livestock that is going to be fair and equitable to 
the producer.
    Mr. Pomeroy. Thank you, Mr. Secretary, and we look forward 
to more information as it comes out of the sign-up. It is very 
good news from OMB yesterday.
    Thank you, Mr. Chairman. I yield back.
    The Chairman Glad you were able to join us, and I think 
that concludes our round of questions. Before we close, though, 
I am going to recognize the distinguished gentleman from 
Kansas.
    Mr. Moran. Mr. Chairman, thank you very much for conducting 
this hearing. Mr. Miller, Mr. Boswell and I would like to be 
very complimentary of your debut performance. I wanted to give 
you the opportunity maybe to introduce those members of your 
team who are with you that we will be working with and dealing 
with, who I assume are seated behind you.
    Mr. Miller. Can I give you their home phone numbers as 
well?
    Mr. Moran. I have my pen and paper in hand.
    Mr. Miller. Well, let me make just a couple of 
introductions because we are dealing with farm programs, and so 
I would like to introduce the Deputy Administrator for Farm 
Programs, Jonathan Coppess. Jonathan, raise your hand. Jonathan 
came to USDA from Senator Ben Nelson's office where he was his 
Legislative Assistant for Agriculture. He spent a great deal of 
time working on the 2008 Farm Bill, so he has an in-depth 
knowledge of how those negotiations proceeded as well. Also, 
Bill Murphy, who is the acting Administrator of the Risk 
Management Agency has joined us today, and again, that is an 
issue that is front and center with this Subcommittee. The Risk 
Management Agency is going to be deeply engaged in the 
negotiations of the new standard re-insurance agreement, and so 
I certainly would direct all your calls, cards and letters to 
Bill. But two people that I do want you to become acquainted 
with who are very important in the operation of the Farm and 
Foreign Agricultural Service, my office, first my Deputy 
Secretary who is working on the domestic issues, Michael Scuse, 
over here, a former Commissioner of Agriculture from Delaware, 
and again, a real-life farmer. He and his brother have a grain 
farm in the State of Delaware, and Michael brings a wealth of 
pragmatic farm experience to this operation, something that I 
certainly appreciate. And also I would like to introduce my 
Confidential Assistant, Brandon Willis. Brandon is a former 
Legislative Assistant for Agriculture for Senator Max Baucus, 
again involved in the 2008 Farm Bill, both from the 
agricultural policy standpoint but also involved in working on 
the funding package that provided us the opportunity to make 
some changes in the farm bill. So he again brings a wealth of 
knowledge to our operation. And finally, Carolyn Cooksie, who 
is the Deputy Administrator for Loan Programs in FSA, who is a 
very valuable asset to FSA, not just because of the important 
position that she holds there in terms of these loan programs, 
which has taken on new and greater significance this year, 
given the challenges facing production agriculture, but Carolyn 
has served during this transition in a number of acting 
positions. I can say with all honesty that had it not been for 
Carolyn, I am sure I would have lasted more than a day at USDA. 
So I certainly want you to feel free to contact any of these 
folks who work in the FFAS mission area.
    Mr. Moran. I thank you, Mr. Secretary. Again, I wish you 
and your team of great expertise well. I look forward to 
working with you. I would again smile when I say that once 
again you have indicated--your performance is excellent. You 
have indicated a willingness to provide home phone numbers but 
didn't do so, and I appreciate a good performance.
    Thank you, Mr. Chairman.
    The Chairman Well, thank you, Mr. Moran. We had a little 
discussion earlier, as you went through your testimony and a 
couple things I would like to particularly appreciate, not only 
the expertise but the hands-on that Mr. Pomeroy made comment 
about. There are a few of us around here that still know how to 
set a drill or a planter, or set the concaves or the wind on a 
combine, and so on, and we think that is very, very important 
and not too many on this side have been there and done that, 
and not too many on your side have been there and done that, 
and we appreciate that. So we anticipate really working hard 
together, and when we disagree we will do it in a friendly way 
and then just get on and get the things done we can get done. 
And so I am very appreciative. And to add a little bit levity, 
going back a few years when I was a primary flight instructor 
in my military days, you had to give a grade slip at the end of 
the flight. We are going to give you a AA today but don't 
anticipate we will always have that. That is a big difference 
between a pink slip, you know.
    Mr. Miller. Thank you, Mr. Chairman.
    The Chairman So we appreciate very much your open dialogue, 
and that was good. I feel the same way, open door. Our door is 
open. I know Mr. Moran's door is open and yours is, so let us 
do our best and that is what you are here, and that is what we 
are here for, and I am looking forward to us progressing. I 
appreciate that you have your team with today. That is good. 
Thank you, Jerry, for getting them introduced.
    With that, we will move to adjourn. Under the rules of the 
Committee, the record for today's hearing will remain open for 
10 calendar days to receive additional material and 
supplemental written responses from the witnesses to any 
question posed by a Member.
    The hearing for the Subcommittee on General Farm 
Commodities and Risk Management is adjourned.
    [Whereupon, at 11:30 a.m., the Subcommittee was adjourned.]

                                  
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